How much car insurance is right for me? How do I know if I have the right kind of policy? The truth is the right car insurance policy for you is the one that provides you with all of the right types of coverage and ample limits for each. It is easy to lose sight of why we have car insurance until we need to use it. Ultimately, all of the coverage types on your policy – including those that reimburse other people – are meant to protect you, the policyholder. Continue reading to learn some reasons why having the right coverage and the right limits are essential.
Money to Fix Your Lost, Stolen, or Damaged Car
When you purchase car insurance in Sheboygan, you will be given to option of purchasing coverage for physical damages to your vehicle. The coverage may not be legally mandatory, but you should never forego this important protection unless you are prepared to spend thousands of dollars on repairing or replacing your vehicle after an accident. Furthermore, you may be under obligation to purchase and maintain coverage for your car if you lease or finance your vehicle from a dealer or lender.
For personal car insurance policies, physical damages protection is divided into two separate types of coverage – collision and comprehensive. Collision insurance reimburses you for vehicle damages caused in a car accident. This could be an accident involving multiple vehicles or only your own. Comprehensive insurance reimburses you for vehicle damages caused by incidents other than collision. This could be damage caused by high winds, hail, fire, theft, vandalism, or even hit a deer.
How Much Coverage Do You Need?
When it comes to collision and comprehensive coverage, there are no limits to choose from. You either have it, or you don’t. Most insurers will cover your vehicle for what it is worth, also known as its actual cash value. The only exception is for collector cars and antique vehicles, which may instead be insured for an agreed value listed in your insurance policy.
Though you do not have to select coverage limits for collision and comprehensive insurance, you do have to choose a deductible. This is the amount of cash you agree to pay out of your pocket toward the cost of any future claims you may file. Deductibles only apply to claims for your own personal losses – not liability claims. You may be able to choose an amount as little as $100 or as much as $1,000, with higher deductibles translating to lower insurance premiums. However, we only recommend choosing a deductible you can afford in case of an accident.
Money to Pay for Damage to another Person’s Property
Things don’t always go as planned behind the wheel of a car. If you are responsible for an accident, you can be held financially liable for any damages you cause to property that is not your own. This could be damages to other vehicles, a home, a business, or even government property. Property damage liability insurance covers the cost of repairing or replacing damaged property up to the limits of your policy. If your limits are too low, you could put yourself at risk of an expensive lawsuit.
Being Underinsured Could Cost You
The cost to repair or replace damaged property can be excessive. For example, if you were to drive your vehicle off the road, through a fence, and into the living room of a home, the damages could easily total $50,000. If you were to cross the median on a highway and hit a 2017 Jeep Grand Cherokee, you would be at-fault for the accident. If the vehicle is totaled, you could also be on the hook for as much as $40,000 in property damage losses. In these examples, you would rely on your property damage liability coverage to take care of the bill.
All drivers are required by state law to carry at least some degree of coverage, but far too often it is not enough. If you only had the state minimum of $10,000 in coverage, you could be sued for tens of thousands of dollars for damages that exceed the limits in your policy, not to mention the cost of your legal fees. You might be forced to dip into your savings, liquidate your assets, or make payments from future income to satisfy any judgment or settlement against you.
Continue reading part two of “How much car insurance is enough?”