You know car insurance is designed to protect policyholders from financial loss, but how much car insurance is enough? It is a question we hear all the time and one that does not have a cut-and-dry answer. What we can tell you is that car insurance should be personalized to mitigate risk for the policy-holder. In this article, we will dive deeper into the various types of car insurance available and reasons why you need adequate limits for each of them.
Coverage When You Damage Your Car
You rely on your vehicle for a lot of things, and chances are, you have a lot invested in it. Even if you are a safe driver, however, accidents can happen – often outside your control. If an unexpected event suddenly left you with a damaged, destroyed, or stolen car, would you have backup transportation? Could you afford to make thousands of dollars in repairs or absorb the financial loss of your vehicle and purchase another car? With collision and comprehensive coverage, you would not have to.
What is Collision and Comprehensive Coverage?
Collision and comprehensive are two separate parts of car insurance that cover physical damages to your personal vehicle. Collision covers damages that happen as a result of a collision, such as a multiple-car accident or running off the road and hitting a tree. Comprehensive coverage takes care of damages caused by other events, such as high winds, hail, fire, theft, or run-ins with wildlife.
Reasons You Need Collision and Comprehensive Protection
It does not matter if you own your vehicle, lease your vehicle, or make payments on a loan for your vehicle; you can probably benefit from physical damages protection. This is especially true if you depend on your vehicle and do not have the savings to replace or repair it out of pocket. Furthermore, banks typically require borrowers to maintain collision and comprehensive coverage to protect the value of the vehicles that serve as collateral for a loan. This is also true of dealers who have a financial interest in leased cars being returned in acceptable condition.
What to Expect from Your Coverage
You can add collision and comprehensive protection to your policy at any time by calling our office here at Wheaton Insurance. We will ask you a series of questions, including how much of a deductible you feel comfortable paying toward the cost of any future claims. Deductibles can range from as little as $100 to $1,000. Lower deductibles can make filing a claim simple and affordable, but higher deductibles can provide upfront savings in the form of lower premiums.
Once you select your deductible, your vehicle will automatically be insured for its actual cash value. If the cost to repair your vehicle exceeds its actual cash value (ACV), it would be considered ‘totaled,’ and you would be compensated for your loss based on the ACV minus your deductible. If you happen to own a collector car or antique vehicle, the terms may be different. In those cases, your vehicle may be insured for an agreed value that is outlined in your policy.
Compensation for Damages to Property that isn’t Yours
What would happen if you lost control of your vehicle and plowed through the front of a neighborhood coffee shop? How much would it cost to replace a brand new luxury car that your teen driver accidentally hit due to distracted driving? These are the types of scenarios no one wants to think about, but everyone should be prepared for. If you are at-fault for someone else’s property damage, you should be able to rely on your property damage liability insurance to cover the costs. Though all drivers are required to carry a minimum amount of coverage, it may not be enough to protect you against a serious accident.
Here’s how it would work:
If the property damage from one of the above scenarios were $75,000, but you only had $25,000 in coverage, the remaining $50,000 does not just go away. Instead, the victim’s insurance company might cover the initial cost of the damages and then sue you to recover its losses. If you are found at-fault, you might become financially responsible for that $50,000, which could put your savings, assets, and future income at risk.
With the cost to repair vehicles and other property so high, you cannot afford to go without adequate limits. Here at Wheaton Insurance, we can help you determine how much liability coverage you may need so that you are covered in the event of a loss.
Continue reading part two of “How much car insurance is enough?”