How much car insurance do you need? What does it take to be confident in the coverage on your policy? At Reis Insurance, we answer these types of questions every day. Car insurance is meant to protect you, your family, and your assets. When it comes to your policy, having high enough limits and the right types of coverage is priority number one. In this article, we’ll explore some reasons why.
Your Vehicle is Damaged, Destroyed, or Stolen
It’s the type of scenario you hope you will never face, but statistics say you probably will – multiple times. When your vehicle is damaged in an accident or another unexpected event, would you rather scramble to find the cash for repairs, or rely on your insurance company to pick up the bill? Would you rather absorb the loss of your investment and use your savings to buy an entirely new vehicle, or cash a check from the insurance company reimbursing you for your loss? Chances are you would rather not use your personal assets to cover the cost of damages to a vehicle. With collision and comprehensive insurance, you don’t have to.
What are Collision and Comprehensive?
Together, collision and comprehensive make up the physical damages portion of your car insurance policy. They both cover repairs to your vehicle or reimbursement for a total loss, only for different types of events. Per the name, collision insurance pays for damages caused by a collision, whether it involves only your car or multiple vehicles. Comprehensive insurance covers damages or loss due to other non-collision events, such as theft, fire, or hitting a deer.
You do not choose limits for the collision and comprehensive section of your insurance policy – only a deductible. The deductible is the amount of money you agree to pay out of pocket toward the cost of your future claims. Depending on your insurer, the deductible options could range between $100 and $1,000, with higher deductibles usually translating to lower premiums. On the other hand, a lower deductible can reduce your financial burden after an accident.
If you need to file a claim, your insurance company will assess the cost of the damages and determine whether the cost of repairs will exceed the actual cash value, or ACV, of the car. Unless you drive an antique car or collector’s vehicle, the ACV is the maximum amount the insurance company will pay to reimburse you for damages or loss of your car. (Antique and collector’s cars are typically insured for an agreed value instead.)
Who Needs Physical Damages Insurance?
Most drivers need collision and comprehensive insurance regardless of whether they own, lease, or finance their cars. If you do not own your vehicle outright, you may be responsible for any damages to your car and protecting the financial interests of your lender or the dealer who leased your vehicle to you. Often, physical damages insurance requirements are outlined in the terms of a lease or loan agreement.
Even if you own your car outright, however, you can still benefit from collision and comprehensive insurance. Not only can it protect your financial investment, but it can also ensure you do not have to find alternative transportation if your car is totaled.
You Damage Someone Else’s Property
If you cause an accident, you could be sued for the damages. Here in Wisconsin, drivers are responsible for the property damages they cause when operating a vehicle. That is why state law requires that all drivers maintain a minimum amount of property damage liability insurance – currently $10,000. If you cause an accident, your property damage liability insurance will be the first to pay up to the limits of your policy.
Unfortunately, carrying only the minimum coverage could expose you to tens of thousands of dollars in risk – especially if you run into a home, business or a brand new luxury SUV. If your financial liability is $75,000 and you only have $10,000 in coverage, how will you cover the remaining $65,000? The victim’s insurance company might pay for the damages upfront and then sue you to recover the loss. That could put your income, assets, savings, and even your future inheritance at risk. Here at Reis Insurance, we can help you decide how much property damage liability protection you need.
Continue reading part two of “How much car insurance is enough?”