How much car insurance do I need? If only there were a simple answer to that question. Car insurance should be personalized to fit your needs based on an assortment of factors. Ask anyone who has ever needed to file a claim, and you will quickly find that having the right types of coverage and adequate limits are more important than anything else when it comes to choosing a policy. In this article, we will dive deep into the types of car insurance you might need and how much coverage you should select for each type.
Compensation for Your Lost, Stolen or Damaged Car
Cars cost a lot of money to repair, and even more to replace. If your vehicle is damaged, destroyed, or even stolen, could you afford to cover your losses out of pocket? For personal car insurance, physical damage protection is divided into two separate types of coverage – collision and comprehensive.
Collision insurance pays for repairs if your vehicle is damaged in an accident. Nearly any type of collision is covered, whether you back into a pole, run into another vehicle, or find yourself in a multi-car pile-up. If the damage to your vehicle is too extensive to justify the cost of repairs, the insurer is instead likely to compensate you for the loss of your car based upon its actual cash value. (Exceptions are made for antique or collector’s vehicles, which may be insured for an agreed value listed in terms of your policy.)
Comprehensive insurance also pays for the repair of your damaged vehicle – only the damages must have been caused by a covered event other than a collision. Examples include fires, theft, vandalism, hail damage, and even hitting a deer. Like collision, compensation for a total loss is based upon the actual cash value of your vehicle unless you drive an antique or collector’s car.
It is important to note that state law in Wisconsin requires neither collision nor comprehensive coverage, but the coverage may still be mandatory if you drive a car that is leased or financed through a lender. Unless you own your vehicle in full, your loan or lease agreement is likely to require physical damages coverage to protect the financial interests of the lender.
Choosing a Deductible
Physical damage claims, whether collision or comprehensive, will require that you pay a deductible toward the cost of the damages. Higher deductibles can lower your insurance premiums, but you should be prepared to pay much more out of pocket if you are in an accident or need to file some other type of covered claim. Depending on your lender, your deductible options could range from as little as $100 to as much as $1,000. Talk with one of our agents for help selecting a deductible that is right for you.
Coverage for Property Damage Liability
Imagine being sued for damages to someone’s home after your teen driver lost control of his vehicle. Think of how much it would cost to replace another driver’s brand new Jeep Grand Cherokee if you were at fault for a collision. These are the types of scenarios in which your property damage liability insurance would protect you against a major financial loss – that is, of course, if you have enough coverage.
Here in Wisconsin, drivers are financially responsible for the damages they cause to another person’s property. State law requires all drivers to carry a minimum amount of property damage liability protection, but it is hardly enough to cover a serious accident. Once you reach the limits of your policy, you are personally responsible for any remaining unpaid damages. Even if the victim’s insurance company initially pays for the damages, it can still pursue you for compensation.
Your coverage needs could vary depending on several different factors. One of our team members will be happy to assist you in evaluating your risk exposure and determining your property damage liability coverage needs.
Compensation for Harm You Cause Others
Accident-related injuries can quickly escalate the cost of a car accident for an at-fault driver. Depending on the number of victims and the extent of their injuries, a driver could be sued for hundreds of thousands of dollars in damages. Typically, bodily injury claims include compensation for medical bills, rehabilitative care, emotional distress, and lost wages, although some drivers may also face punitive damages for negligence in causing the accident. Bodily injury liability insurance can cover the cost of injury-related losses – but only up to the limits of your policy.
As a policy-holder, you can choose how much coverage you want for your bodily injury liability coverage so long as it meets the minimum standards required by the state. While a low limit may provide some minimal protection against minor injury claims, it could be insufficient to cover any larger claims. Once you exhaust the limits on your insurance policy, you remain personally responsible for any damages that exceed your liability coverage – even if that means draining your savings accounts or garnishing your future wages.
Here at Ellis Insurance, we encourage our customers to select high-limit coverage that will safeguard their income and assets against litigation. Ultimately, a car insurance policy – including the liability portion of the policy – is not meant to be a burden, but rather designed to protect the policyholder in the event of an accident.
Split Limits vs. Combined Single Limit (CSL)
When you choose your limits, your insurance company may offer coverage in one of two ways – a combined single limit (CSL) or a split limit. Both provide effective liability protection after an accident, but they differ in the ways they allocate coverage. If your policy has a combined single limit, you will see a single number listed under your bodily injury liability coverage; this is the total amount of coverage available to all victim injuries combined after an accident. A 300 CSL, for example, covers up to $300,000 in total bodily injury liability per accident, regardless of how many victims are injured.
A split limit provides bodily injury liability protection with greater restrictions on the amount of coverage available to each victim. This type of limit will appear as two different numbers on your policy. The first is the maximum available coverage per individual, and the second number is the maximum total available$250,000 per injured individual and up to $500,000 total bodily injury liability per accident.
Money to Protect You and Your Passengers against Uninsured or Underinsured Drivers
Uninsured drivers are more prevalent than you might think. As recently as 2012, more than 10 percent of Wisconsin drivers were driving without insurance of any kind. That doesn’t account for the countless more who drive with too little coverage to pay for a major liability. Though you could sue an at-fault driver for damages, it could be a long, painstaking process attempting to recover any compensation. Instead, you can take steps to protect you and your passengers now by adding uninsured motorist (UI) and underinsured motorist (UIM) protection to your policy. This ensures your injuries are covered if you are injured in a hit-and-run or by an uninsured or underinsured driver.
Money to Help with the Little Things
For most drivers, paying for a few small incidentals will not break the bank. Paying for several at the same time, however, could deal a heavy blow to your budget or savings. After an accident, you could be responsible for many different ‘small’ charges, such as towing fees, rental car fees, medical co-payments, and health insurance deductibles. All of this can add up to hundreds or even thousands of dollars in extra out-of-pocket expenses. At Ellis Insurance, we recommend adding extra coverage to your policy to help with medical payments, towing, rental fees, and more. Talk to an agent at our office for more information.
Beyond Car Insurance
Finally, it is important to review your liability needs even if you select the highest-limit liability coverage. In most cases, your high-limit car insurance is more than enough to cover injuries and property damages after an accident. In extreme cases, such as collisions that result in traumatic injuries or fatalities, lawsuits can result in judgments or settlements that cost hundreds of thousands, and perhaps even millions of dollars. Even with your car insurance, you could still face financial ruin without extended liability protection.
Umbrella insurance provides supplemental coverage that extends your liability protection by as much as $1 million or more. This affordable protection pays the liability that remains after you reach the limits on your primary coverage. While it may sound excessive, this is the type of coverage that saves families from losing a lifetime of savings. For more information or to find out if umbrella insurance could be right for you, contact our office today.