It is one of the great questions in life. It’s obviously important since state law requires all drivers to have coverage. But why are there so many options? How do you know if you have the right types of coverage and enough to fully protect you against potential losses? In this article, we will explore the reasons you need the right coverage and the right limits.
Your Vehicle is Damaged, Stolen, or Destroyed
Accidents, hail damage, theft – you hope it never happens to you, but if it does, collision and comprehensive insurance will have you covered. Statistics show that the average driver will file a claim for a car accident about once every 17-18 years. Of course, that doesn’t account for the additional claims you might need to file for non-accident related damages. Collision and comprehensive insurance pay for repairs or replacement of your vehicle after it is damaged due to a covered event.
Collision insurance pays for damages caused by accidents. It could be that you swerved off the side of the road or perhaps collided with another vehicle. Comprehensive, on the other hand, pays for damages caused by events other than collision. Examples include hitting a deer or being the victim of vandalism. Since collision and comprehensive cover different types of events, you will need both types of coverage to insure your vehicle against loss or damage fully.
In many cases, collision and comprehensive insurance are both required to satisfy the requirements of a lender. Drivers who lease or finance their vehicles through a bank may require physical damages coverage to insure their financial interest in the vehicle until it is returned or outstanding loans are paid in full. Even if you own the title to your vehicle free and clear, you should still consider adding collision and comprehensive coverage to shield yourself against a major vehicle repair bill or total loss.
There are not many options when it comes to physical damages protection. You either have it or you don’t. Insurance companies typically cover your vehicle for its actual cash value unless you own a collector or antique vehicle, which may instead be covered for an agreed value. You will, however, need to choose a deductible. The deductible is the amount of money you pay out of your pocket toward the cost of your claim. Keep in mind that your premiums are directly affected by the amount of your deductible, with higher deductible typically resulting in lower premiums. However, you should never select a deductible that is more than you could reasonably afford to pay for a claim.
You Damage Property that isn’t Yours
It is bad enough when you damage your vehicle. It is a whole different story when you damage someone else’s car or personal property. For every accident, there is someone who is financially responsible for the damages. If that person happens to be you, you will hope you have enough property damage liability protection to cover the bill.
If you hit and total a brand new luxury SUV, the damages could easily total $80,000. If you have $100,000 in property damage liability, you can rest assured you are covered. However, if you only have the Arizona state minimum of $10,000 in property damage liability, you may find yourself facing a lawsuit in court.
Often, victims’ insurance companies will pay for damages upfront and then pursue the at-fault party to recover those losses. Once the limits on your insurance have been reached, you may be personally responsible for any damages that remain. Unless you want to dip into your savings or pay compensation out of your personal income, we recommend talking to an agent here at The Don Neeley Agency to ensure you are adequately covered.
Compensation for Harm You Cause Others
Beyond the cost of repairing or replacing someone’s damaged property, you might also be responsible for any injuries you cause as an at-fault driver. It does not matter if you are partially at-fault or completely at-fault, or even if it was bad weather or a tire blowout that caused the collision; what matters is that the accident happened, and you are financially responsible. Bodily injury liability insurance helps to cover victim medical bills, rehabilitative care, future medical bills, lost wages, emotional distress, and more.
Of course, your insurance can only provide coverage for those expenses up to the limits you select for your policy. If your limits are too low to cover the total damages, you could be sued for compensation for any remaining losses. That means your personal savings, valuable assets, and even your future income could become vulnerable to liquidation or garnishment.
How Much Bodily Injury Liability Coverage Should You Choose?
Insurers typically extend bodily injury liability coverage based on either a combined single limit (CSL) or a split limit. The combined single limit is the maximum amount the insurer will pay for compensation for all victims’ injuries in an accident. A split limit includes two coverage amounts typically separated by a forward slash (i.e. 25/50 or 250/500). The first number is the amount in thousands payable per individual victim in an accident. The second number is the maximum combined amount in thousands payable to all victims in an accident.
At a minimum, the state requires that all drivers carry a minimum amount of bodily injury liability coverage. However, that amount is far too low to provide any significant protection against financial responsibility in an accident that results in a severe injury, injury to multiple victims, or even a fatality. In most cases, we recommend far more than the minimum coverage, although your policy limits should be personalized to fit your individual needs.
Money to Protect You and Your Passengers against Uninsured or Underinsured Drivers
If you are hit by another vehicle, you trust that their insurance will cover your losses. Unfortunately, many Arizona drivers either have too little coverage or otherwise choose to drive with no insurance at all illegally. If you are hit by an uninsured or underinsured driver, you can look to uninsured motorist (UI) and underinsured motorist (UIM) protection to pay for injuries to you and your passengers. Since UI and UIM protect you and the people riding with you, we consider this one of the most important types of coverage on your policy.
Money to Help with the Smaller Things
How much would it cost to have your car towed after a collision? How long will you be without transportation while your vehicle is repaired? Do you have the cash to cover your immediate medical expenses after an accident? There are many different types of coverage available to lessen the financial blow after a collision. Medical payments and coverage for towing and rental car fees are just a few examples of ways you can customize your policy to better fit your needs.
Beyond Car Insurance
There are extreme cases when even the highest car insurance policy limits come up short of covering a financial liability when you are at-fault for a collision. For example, if a young lawyer is permanently disabled and unable to continue his career due to injuries sustained in a collision, a jury may easily award the victim $2 million for compensation of medical expenses, lost future wages, and emotional distress. While a $500,000 liability limit will only pay a fraction of the cost, an umbrella policy could supplement the remaining damages, shielding the at-fault driver against financial ruin. Umbrella policies can extend your liability coverage by as much as$1 million or more and can be very affordable. Talk to an agent here at The Don Neeley Agency for help determining if an umbrella policy may be right for you.