Many of us accept an insurance policy that is presented to us by an Insurance Agent without questioning the terms. When purchasing auto insurance, you need to balance what you can afford against the risks.
By: Cristina Toney
Many of us accept a policy that is presented to us by an Insurance Agent without questioning the terms. Will the coverage be enough to protect my assets and income against a law suit, if I was in an ‘at fault’ accident? Will it cover my medical bills if someone hit me that did not have enough insurance, or did not have any insurance coverage at all?
Here is an explanation of your auto insurance policy that will help you determine just how much insurance you will need:
Bodily Injury Liability (Coverage A) covers you against a law suit if you were in an ‘at fault’ accident and injured the people in the vehicle(s) you hit. The amount should be as high as you can afford because it covers the medical bills of the injured people. Keep in mind how much medical costs have escalated in recent years and if you do not have enough coverage under this part of your policy, the injured will have no other recourse than to sue you personally, to pay for their medical bills.
It usually looks like this on your policy: Coverage A – 100/300
(Limit per person/limit per occurence)
In this example, $100,000.00 per person in medical bills to a maximum of $300,000.00 per occurrence is covered. Of course, these figures can be lower or higher.
The first figure is the maximum amount of medical bills your policy will pay per person in the vehicle(s) you have hit.
The second figure is the maximum amount of medical bills your policy will pay for that ‘accident’ or occurrence. This means, if you hit a vehicle or several vehicles in this one accident, your policy will cover you for only this stated amount, no matter how many people were injured, or the amount of their medical bills. Therefore, not all injured will get $100,000.00 to cover his or her medical bills. Your Agent can explain how your policy will pay, if you should injure more than one person.
Since your personal assets and income are at risk, I recommend getting the highest amount of Bodily Injury Liability coverage that you can afford. Increase your coverage in increments until you are properly covered.
Personal Damage Liability (Coverage B) covers you against a law suit should you damage any property in an accident. This could be another vehicle, a tree, a wall, a pole, side of a home, etc. You’ll want to make sure that your policy limits cover other property and expensive vehicles where repair bills, on a ‘fender – bender’ can run into the thousands of dollars.
Medical Payments (Coverage C) covers you against a law suit should you or passengers in your vehicle become injured in an accident. Medical bills for you and your passengers are covered under this provision. However, it usually has a single limit that applies to all persons. Therefore, the stated coverage amount will be divided among the injured in your vehicle. Your agent can advise on the payout limits and if coverage will be per person or one lump sum.
Again, keep in mind just how expensive medical costs can be, and remember, even your best friend or a family member is capable of suing you.
Uninsured and Underinsured Coverage also know as UM and UIM (Coverage J) protects you personally.Very few people have the most important coverage. It covers your medical bills, should you be in a ‘non at fault’ accident, and the person who hit your vehicle and injured you and your passengers, did not have enough Bodily Injury (Coverage A), or did not have any auto insurance at all! This coverage is above and beyond Medical Payments (Coverage C). It also protects you from a ‘hit and run’ vehicle and pays out the same as Coverage A (per person/per accident).
Many young and senior drivers are only covered for the minimum amounts that your state will allow, as they cannot afford much more. I recommend that, although this may be the most expensive item on your policy, you should try to get the same limits on this, as you have on Bodily Injury – Coverage A. You are even more important than strangers in another vehicle, and it is worth every penny. Also, if you have more than one vehicle you need to ‘stack’ this coverage, then it will cover you no matter what vehicle you drive, and it saves you money instead of having to purchase this for each vehicle.
Some Other Items to Add: Car Rental, Towing and Labor, and Work Loss riders are inexpensive and help you with the minor costs.
Car Rental reimbursement coverage applies if you need to rent a car when your vehicle has been damaged. It usually pays a certain figure per day; however, some companies have a time limit as well.
Towing costs are covered under this item . However, if you have a membership in an auto club, you do not need this. It usually pays per mile, with a limit on the miles.
Work Loss rider will cover some of your income if you can’t work due to an accident.
Umbrella Policy also covers you against a law suit. It goes above and beyond Coverage A. If your assets or income are $100,000 or more, for pennies on the dollar, you can have a million dollars or more in coverage. Usually this policy costs under $300.00 a year, depending on your company and the amount you request. No business person or self-employed individual should be without this coverage. Ask your Agent if this policy is right for you.
When purchasing auto insurance, you need to balance what you can afford against the risks. Always take into account the protection of your assets and income, the rising costs of medical treatment, vehicle repair costs, and the number of law suits filed.
About the Author:
Cristina Toney has been a licensed Insurance Broker in the state of Nevada since 1995. She maintains the philopsohy of providing her clients with the maximum level of financial and income protection, when providing for their insurance needs.