There are so many options to choose from when shopping for car insurance. Which types of coverage do I need? How high should my limits be? We hear these types of questions all the time, and we enjoy helping our customers learn how to customize their policies to fit their needs. In this article, we will explore reasons why having the high limits on the coverage you need is a critical part of protecting your financial future.
Your Vehicle is Damaged, Destroyed, or Stolen
Statistics show that the average driver will file three to four claims for collision damages during his or her lifetime. Add in losses caused by hail, theft, fire, fallen tree limbs, and wildlife, and it is easy to see why physical damages insurance can be so beneficial. Why risk losing thousands on car repairs or the total loss of your car when collision and comprehensive insurance can take care of it instead?
The physical damages portion of your insurance policy is separated into two different types of coverage – collision and comprehensive.
Collision – covers the damages to your vehicle caused by a collision; accidents may include multiple vehicles or only your own.
Comprehensive – covers the damages to your vehicle caused by non-collision events; examples include fire, theft, vandalism, hail damage, and run-ins with wildlife.
Deductibles typically apply to collision and comprehensive damages claims. You can choose your deductible when you purchase your policy, with options that usually range from $100 to $1,000. Lower deductibles reduce the financial burden of filing a claim and also maximize the benefit received from your insurer. On the other hand, higher deductibles can lower your insurance premiums, resulting in immediate savings even if you never need to file a claim. We recommend choosing a deductible based on your personal preferences and the amount you would comfortable paying out-of-pocket toward the cost of future claims.
While you will have to select a deductible, you will not have to choose limits for your collision and comprehensive coverage. Unlike other assets you may own that may come with different coverage options, your car is likely to be insured for its actual cash value. The actual cash value is the depreciated value of your car at the time the damage occurs. The insurer will typically pay for repairs up to that amount. If damage costs exceed the ACV, your car will be considered a total loss, and you will be reimbursed for the actual cash value of your vehicle minus your deductible. (Note: There are exceptions for antique and collector cars, which may be insured for a predetermined amount agreed to between the insurer and the policyholder.)
Do You Need Collision and Comprehensive Coverage?
Here at Stauffer-Klug Insurance, we believe that nearly all drivers can benefit from coverage to a personal vehicle against physical damages. If you lease or finance your car, chances are you are already required to maintain collision and comprehensive coverage according to the terms of your financial agreement. Even if you own your vehicle, adding physical damages coverage can help protect you against a major financial loss. It assures you continue to have reliable transportation and also protects the value of your car should you ever want to sell it or trade it in.
You Damage Someone Else’s Property
It’s not easy being responsible for an accident – especially if you damage someone else’s property. Here in Wisconsin, at-fault drivers are financially accountable for the damages they cause. By law, all drivers must carry a minimum of $10,000 in property damage liability coverage, but it often falls short of what’s needed to compensate victims for their losses. If there is any financial liability that remains after you reach the maximum limits of your car insurance policy, you could be personally sued for the remaining damages.
If you think it is unlikely that you would ever need high-limit property damage coverage, think again. If a driver hits a brand new 2017 BMW and totals the vehicle, the damages could easily total $75,000. You could also easily accumulate tens of thousands of dollars in liability if your teen driver plows into someone’s home or business. You may not know the future, but you can take steps to protect your income and assets from it.
For help determining how much property damage liability coverage is right for you, contact our office.
Compensation for Harm You Cause Others
Without the right liability coverage, you could lose big if you cause an accident. Just like property damage liability, bodily injury liability also requires that you purchase adequate limits if you want to minimize your financial vulnerability after an accident. If you cause a collision that injures one or more people, you are responsible for their medical bills, lost wages, and more. A jury could also impose punitive damages – especially if you were negligent at the time of the accident. It does not matter if you were texting behind the wheel, blew a tire, or simply skid out of control on a patch of black ice, what matters is that the accident happened, and you are totally or partially at-fault.
Bodily injury lawsuits can total hundreds of thousands of dollars. Wisconsin requires that all drivers carry a minimum amount of bodily injury liability coverage, but the limits are far too low to cover all of the liability after a major collision. Here at Stauffer-Klug Insurance, our goal is to look after the best interests of our customers. We recommend purchasing much more than the minimum bodily injury liability coverage as a means of protecting your income and assets against a major loss. Considering you might have to pay any excess liability beyond the limits of your policy out of your own pocket, it is easy to see why having the right coverage is so important. Without it, you could be putting your savings and financial future at risk.
Split Limits vs. Combined Single Limit (CSL)
Your insurance company will list bodily injury coverage limits in your policy either in the form of a combined single limit (CSL) or split limits. A combined single limit is a maximum amount the car insurance policy covers for total bodily injury liability per accident. It may appear on your policy as a single number, such as 300 CSL. In this case, 300 CSL would indicate a maximum of $300,000 total bodily injury coverage for all victims combined in an accident.
A split limit looks different. On your policy, it may appear as two separate numbers, such as 250/500. The first number is the maximum amount in thousands the insurance company will pay toward bodily injury liability per individual victim. The second number is the total amount in thousands the insurance will pay for bodily injury liability for all victims combined per accident.
Money to Protect You and Your Passengers against Uninsured or Underinsured Drivers
Driving without insurance is against the law, yet many Jefferson area drivers still do it. If you are unlucky enough to be hit by an uninsured motorist, you might have a difficult time recovering compensation for your injuries. In this case, uninsured motorist (UI) protection can step in to provide coverage for you and your passengers’ injuries. Similarly, underinsured motorist (UIM) protection can pick up the slack left behind when you are hit by a driver with too little coverage to cover your injuries.
Money to Help with the Little Things
When you think of an accident, you might think of damaged vehicles and lawsuits. However, there are plenty of other small expenses that go less noticed. For example, towing charges can cost hundreds of dollars after a collision. Add on the cost of a rental car for a week or two while your car is being repaired, plus the cost of doctor office co-pays and your health insurance deductible, and your budget could quickly deplete. Instead of spending hundreds or even thousands of dollars on all the ‘little’ things, let us customize your policy with extra coverage for medical payments, towing, rental cars, and more.
Beyond Car Insurance
Keep in mind that even a well-tailored car insurance policy might come up short of meeting your coverage needs in a major accident. When lawsuits soar past even the highest liability coverage limits, supplemental liability can provide the extra protection you need to safeguard your income and assets against a devastating loss. Umbrella insurance is a separate policy that is secondary to the primary liability protection on your car insurance. Once you reach the limits on your primary coverage, umbrella insurance can bridge the gap, extending your liability protection by an additional $1 million or more.
Umbrella insurance is surprisingly affordable given the high coverage limits it carries. With low premiums and the potential to protect a family’s financial future, we recommend all drivers consider adding this important coverage to their insurance portfolios.