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.
Compensation for Harm You Cause Others
Even the safest drivers can cause accidents. You don’t have to be intoxicated or texting while driving; an unexpected tire blowout, bad weather, or even other drivers who slam on their brakes can all lead to collisions. Whether you are fully or only partially at-fault, if you injure someone in an accident, you can be held financially responsible for the cost of any medical bills, rehabilitative costs, lost wages, and even emotional distress awards you may be liable for after an accident. If you are found negligent, you may also be responsible for punitive damages – especially if you were driving while distracted or under the influence of a substance.
Bodily injury liability insurance is designed to shield you from the financial responsibility of another person’s injuries. Drivers in Waukesha and throughout Wisconsin must purchase at least the minimum bodily injury liability coverage required by law, but we here at Wolfgram Insurance typically recommend much more coverage than that. When it comes to liability protection, being underinsured could put your personal income and assets at risk.
What Would a Lawsuit Cost You?
Accident-related lawsuits can result in massive settlements and judgments. If you only had $25,000 in bodily injury liability coverage, how would you pay for a victim’s injuries that total more than $100,000 in medical bills and other expenses? That leaves $75,000 more than your insurance limits that you might have to pay out of pocket. Would you liquidate your savings? Would you make payments from future income? Simply raising the limits on your coverage could help you avoid such a scenario, potentially savings you tens or even hundreds of thousands of dollars.
Split vs. Combined Single Limit Coverage
Car insurance companies offer bodily injury liability coverage in one of two ways: split limits and combined single limit coverage (CSL). Split limits mean that there are two different limits – the first representing the maximum amount the insurer will pay to cover an individual victim’s injuries and the second representing the maximum amount the insurer will pay to cover all victims in an accident combined. On your policy, a split limit could appear as 250/500, meaning $250,000 individual bodily injury and $500,000 total bodily injury per accident. A combined single limit does not restrict the amount of money available per victim. Instead, a limit that appears on your policy as 300 CSL would provide up to $300,000 in total coverage per accident, which can be allocated to victims in any amount.
Money to Protect You and Your Passengers against Uninsured or Underinsured Drivers
Not all drivers on the road are as responsible as you are. You depend on the insurance of other drivers to cover you and your passengers’ injuries after an accident. If you are hit by an uninsured or underinsured driver, however, you might have trouble recovering your losses. We consider uninsured motorist (UI) and underinsured motorist (UIM) insurance two of the most important types of protection you can purchase to protect you and your passengers against the negligence of others.
Money to Help with the Smaller Things
There are major costs associated with an accident, and there are small ones. Sometimes, it is the little things that can add up to big financial burdens if you do not have adequate coverage. We can help you personalize your car insurance policy with coverage for towing charges and compensation for a rental car while your vehicle is being repaired or replaced. Your policy can also include medical payments coverage for out-of-pocket expenses like deductibles and co-pays, regardless of who is at-fault for an accident.
Beyond Car Insurance
In most cases, a well-constructed car insurance policy that is personalized to meet your needs will financially protect you, your vehicle, and your passengers after an accident. However, there are some extreme cases in which even the highest coverage limits can come up short. For example, if you are sued for a major accident that resulted in a fatality or a career-ruining paralysis, your liability could easily reach $1 million or more. With a $500,000 limit on your coverage, you could still be facing financial devastation and years of wage garnishment. In these cases, it could be beneficial to have an umbrella policy that extends your liability protection with an additional $1 million or more in supplemental coverage. Our team can help you review your liability coverage needs to determine if an umbrella could be right for you.