This post is part two of the blog post that answers the question “How much car insurance is enough?”
Compensation for Harm You Cause Others
When you are at-fault for an accident, there is no way around your financial liability. Ultimately, you can be held responsible for medical bills, lost wages, emotional distress compensation, and other injury-related expenses. There may also be punitive damages to pay – especially if you were texting or intoxicated at the time of the accident. Fortunately, bodily injury liability insurance can shield you from the financial fallout after an accident. Here in Minnesota, all car insurance policies include at least the minimum amount of bodily injury liability required by law, although you can (and should) select higher limits to protect yourself against a major financial loss better.
How Much Could a Lawsuit Cost You?
Major accidents can result in lawsuits that threaten your savings, income, and financial future. If the limits on your bodily injury liability coverage are too low, you could become responsible for tens or even hundreds of thousands of dollars of injury-related expenses. How would you cover the cost of damages that exceed your insurance limits? Why risk financial ruin when you could better protect yourself with higher bodily injury liability limits?
Split Limits vs. Combined Single Limit (CSL)
There are two ways that insurance companies can cover bodily injury liability. The first is known as a split limit and may be listed as two separate numbers on your car insurance policy. For example, a 150/300 split limit would indicate the insurer will pay up to $150,000 in bodily injury damages per individual in an accident, with a maximum of $300,000 total available for all victims combined per accident. The second type of coverage is known as combined single limit (CSL), which is listed as a single number on your policy. For example, a 300 CSL indicates that a total of $300,000 is available to cover bodily injury liability per accident with no additional limit on the amount available per individual.
Money to Protect You and Your Passengers against Uninsured or Underinsured Drivers
Protecting you and your passengers is perhaps the most important component of your policy. Minnesota is a ‘no-fault state,’ meaning drivers carry mandatory Personal Injury Protection (PIP) that provides primary coverage for injuries in a car accident regardless of who is at fault.
Any claim that exceeds the limits of your PIP coverage will defer to the bodily injury liability coverage of the at-fault driver. If you are hit by a driver who does not have enough insurance to pay for you and your passengers’ accident-related injuries, your underinsured motorist (UIM) protection can help fill in the gaps. Finally, your policy can also include uninsured motorist (UI) protection, which helps cover your injuries if you are hit by a driver with no liability insurance at all.
With regards to PIP limits, they can be increased at a very reasonable cost through stacking in multi car households or just increasing with single car households. Stacking works by doubling the coverage, or in other words, being able to collect on your own PIP coverage, as well as that of another driver on your policy. As an example, the loss of income for an individual (now at $500/week not to exceed 85% of gross salary) could double to $1,000 per week.
Some retirees will opt to decline the loss of income in exchange for a small discount. This may be fine, but the question you should ask yourself is, would you be able to get by with only your benefits if your spouse was killed in an accident? By keeping the wage active, the coverage would replace social security lost with their death.
Money to Help with the Smaller Things
If you have ever paid for a rental car or a tow truck, you know how expensive these types of services can be. It can add hundreds of dollars to your losses after an accident unless you have coverage included on your insurance policy. Here at Wheaton Insurance, we help drivers build custom policies that include coverage for the ‘little things’ that matter the most.
Beyond Car Insurance
Sometimes, car accident-related liability expenses can be exorbitant – especially if someone is permanently disabled or if there are multiple victims who are injured. In extreme cases, accidents can result in seven-figure judgments and settlements, which is far more than even the highest car insurance limits can cover. For example, if you hit a young physician, you could be responsible for millions of dollars in lost future income, not to mention hundreds of thousands of dollars in current and future medical bills.
Instead of losing your savings, assets, and facing financial ruin, you could rely on your umbrella policy to provide extended liability protection. Umbrella insurance is supplemental liability coverage that provides an additional $1 million or more in coverage beyond the limits of your primary coverage. Given its affordable price and the millions of dollars it could save, we recommend all drivers give serious consideration to this type of coverage.