Do you know how much car insurance you need to protect your income and assets against a potential lawsuit? Do you know which types of coverage you need to protect the value of your car and also ensure you have transportation even after a collision? These are the types of questions that all drivers should know the answers to. At Wolfgram Insurance, we know how important it is to have the right coverage and limits. Car insurance is meant to protect your finances both now and in the future, but it can only do so if you have the right policy. In this article, we’ll dive into reasons you need the right car insurance coverage and adequate limits.
Your Vehicle is Damaged, Destroyed, or Stolen
After the dust settles after an accident, you may begin to wonder how your car is going to get fixed. If it is a total loss, you might wonder how you will afford to replace your car with another one. If you had collision and comprehensive coverage on your insurance policy, however, you could relax knowing your insurer will pick up the bill.
What is Collision and Comprehensive?
Collision and comprehensive insurance are two different types of coverage that work together to provide complete physical damages protection for your personal vehicle. Collision covers damages caused by a car accident, whether you collide with another vehicle, several vehicles, or even a tree. Comprehensive takes care of most non-collision events, such as hitting a deer or finding out your car has been stolen overnight.
When you file a collision or comprehensive claim, the insurer will determine whether your vehicle can be repaired or if the cost exceeds the actual cash value (ACV) of the car. The ACV is the maximum amount most insurance companies are willing to cover a vehicle for, except antique and collector cars, which may be insured for an agreed value between the policyholder and the insurer. If damages to your vehicle exceed the ACV, the insurer will typically reimburse you for the loss of the vehicle’s actual cash value minus your deductible.
Choosing a Deductible
While there are no limits to select on collision and comprehensive insurance (you either have coverage, or you don’t), you will need to choose the amount of money you are willing to contribute toward the cost of future claims. Known as the deductible, this amount could be as little as $100 or as much as $1,000 depending on your insurer and preferences. Smaller deductibles are more affordable when you need to file a claim, whereas higher deductibles can reduce the amount you pay for premiums. Whichever you choose, just be sure to select an amount that will not cause financial strain should you need to file a claim.
Do You Need Collision and Comprehensive Coverage?
There is no law that requires you to purchase physical damages protection for your own vehicle. However, you may be required to carry coverage if your vehicle is leased or financed through a lender. This protects the financial interest of the car’s owner or lienholder until you either return the vehicle or own the title free and clear. Even if you do not owe a penny on your car, you will probably still benefit from adding collision and comprehensive to your policy. Not only does it protect your investment, but it also ensures you can replace your transportation if your vehicle is ever stolen or destroyed.
You Damage Someone Else’s Property
Even the safest of drivers have accidents from time to time. If you are at fault for a collision, you will need to come up with the money to repair or replace the property you damage. As a driver in Wisconsin, you are required to carry at least $10,000 in property damage liability, but will it be enough to cover a major accident?
Fender benders are one thing, but totaling a brand new luxury SUV is another. Imagine finding out your property damage liability in an accident is $75,000 and your insurance will only cover $10,000. How will you pay for the remaining $65,000? Will you have to dip into your personal savings? Will you need to make payments from your income for years to come? Even if the victim has insurance, you can still be sued for compensation for damages.
For help determining how much coverage is right for you, contact our office to speak with an independent agent.
Continue reading part two of “How much car insurance is enough?”