In a time where people are taking a hard look at their finances, a lot of folks turn to insurance as a potential for the chopping block. Now more than ever before, it’s important to understand coverage, and what you could be losing if you choose premium over coverage. I completely understand the need and desire to save money, but I want to bring to light just a few reasons why decreasing coverage is not necessarily the best option.
The number of car accidents is ever increasing. Distracted driving, road conditions due to weather, drunk drivers and speeding contribute to trauma and tragic loss. The liability limits on your auto policy are there to protect you and the people outside of your vehicle. The lower your liability limits, the more exposed you are. Let’s look at the following example.
Your auto policy has state minimum liability limits, $25,000 per person up to $50,000 per accident. You accidentally slide through a 4 way stop due to ice on the roads. In the process of sliding, you T-bone another vehicle carrying 3 passengers. Their car spins off the road into a tree. Even though it wasn’t intentional, you are now responsible for the damage to that vehicle, including if it was totaled, and the injuries of all 3 passengers, both immediate and future that arise from this accident. Let’s dive even further. Most likely the vehicle is totaled. That is a minimum of $10,000 if the vehicle is an average of 4-8 years old. You have $40,000 left for the accident now.
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The driver of the vehicle you hit fractures 4 ribs, breaks their arm and has a concussion. They are taken to the hospital by ambulance ($2000) and have a CT scan(s) (up to $6000) and x-rays ($100-$1000 per). They stay overnight for observation (minimum of $2883 on average) for the concussion.
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Passenger 2 has their nose broken from the impact of the air bag and their leg is also broken. They are taken to the hospital by ambulance ($2000), and have a CT scans (up to $6000) and x-rays ($100-$1000 per ). Their leg is broken in multiple places and will need pins to adhere the bones back together correctly. Surgery is needed, which includes anesthesia and at least 2-3 days of a hospital stay plus additional pain meds ($17,000-$35,000+). They probably will also need physical therapy to learn how to re-walk ($700-$3000).
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Passenger 3 in the backseat passed away upon impact with the tree. There is no price for the loss of a precious life, however, this passenger’s family, in their grief, sues you for negligence.
I’ll leave you to do the math, but on the low side of everything listed above, you’ve run out of limits both per person and for the accident as a whole. Even though it was an accident, once the insurance company pays out the maximum amount available on the policy, you are still held liable and responsible for the rest. The family suing you as well as the other 2 passengers who need more than $25,000 can come after you directly. All your assets, house, cars, boats, income; all of it could be at risk. I don’t mention any of these things to scare anyone, quite the opposite. Our team wants you to know for certain that you have adequate coverage. We are inundated with TV commercials that tell us to pay what we want or only pay for what you need. The truth is that what you need is more than what’s advertised. I would rather pay a little more in premium now, than be unprepared and underinsured at the time of a loss.
