Q: How much would my insurance pay me if I was in a really bad accident?
A: Of course you never want to be the victim of a really bad accident. But if you did, you’d want the other person to take care of you. If the other person was at fault, his/her insurance would be the first to pay you. So if the other person had a policy with a million dollar limits, it’s possible you could get a million dollars. Unfortunately few of the people that cause major accidents have million dollar insurance policies. When the other person’s insurance is not enough, you can still look to them personally to pay for your injuries. It stands to reason that we might have a little be difficulty getting what we think we need if we’re counting the other guy to have “enough” insurance. Fortunately, we can put coverage on your policy in case the other guy didn’t have insurance or he/she didn’t have enough. It’s called Uninsured Motorist and Under-Insured Motorist. It is designed to supplement the other person's insurance so you can get paid for lost wages, pain and suffering, and medical expenses when you’re the victim.
Much like Bodily injury limits, how much Uninsured and Under-Insured coverage you need is up to you. When you’re considering this coverage think of an accident that means you will never get back to work. Ask yourself, what that will mean to your retirement plans, your spouse, and your children. Now we want to estimate a dollar figure that will come close to helping you satisfy those needs.
We also have a coverage designed to help pay your medical out of pocket in an accident. Unlike Bodily Injury, Uninsured, and Under-Insured Motorist, Medical payment is not as concerned with fault. An accident can be your fault and we still have medical payments to help you pay out of pocket. It is designed to be easily accessible so the hospital and doctors get paid quickly. We only pay up to the limit and the limit is per claim (not per year). So, it’s a very good idea to have your Medical Payment limit be higher than the medical out of pocket. By doing this you’re ensuring that you won’t go into debt because of the medical costs associated with an accident.
Q: What should my liability limits be?
A: This is a great question that we don’t hear often enough. Although everyone can get excited about saving money on insurance premiums, some people don’t consider what those payments are buying. If you or someone close to you has ever been in a serious collision, you probably understand the importance of having good coverage. But what is good coverage? Good coverage has to be coverage you’re comfortable with not something required by the state or your lender nor is it something your neighbor or parents have. It must be specific to you and your financial situation.
To start I’d like to describe how your liability coverage works. Liability describes the amount that would be paid to someone else should you be responsible for an accident. Under liability, we have Bodily Injury and Property Damage. Bodily Injury is the part that will pay for the other persons’ medical expenses, lost wages and possibly pain & suffering. The limits are talked about in terms of per person and per accident. Insurance will not pay out any more than the per person limits to any one person. It will also not pay out any more than the per accident limit for the entire accident. The Property Damage portion will cover damage you cause to objects like cars, guard rails and telephone poles. If the damages exceed your limits it is possible that you are held personally responsible for the excess damages.
So, to get good limits for liability you need to first determine what’s at stake. That’s why I typically ask about people’s income and assets. When a person has substantial income and the insurance will not pay as much as a court awards them, the other person can garnish wages and attempt to take some of your assets. I get concerned when people do not have at least 3 times their annual income for a per person bodily injury limit. Another concern I have is when they have significant assets but the bodily injury liability is less than that.
As I stated in the beginning, though, you are the one that has to be comfortable with your limits. I have customers who do not have significant income or assets but want their coverage to be as high as we can get. I have a few people who have well over a million dollars in assets, know the risks and have coverage for only $100,000 per person and $300,000 per accident. Sometimes I talk to someone just starting out in life. Their income is low and their bills are high. For budget reasons, they decide on lower limits. But we agree to discuss it again as time goes on and gradually get them to the coverage levels they need. Other times I talk with people and they have no assets and live in social security retirement and we’re able to lower their limits. Most commonly I talk to people and they still have the same limits they had 20 years ago, even though everything else has gone up. For these reasons, it’s a good idea to meet with your agent regularly to make sure the coverage is adequate.
Q: Why is it that my insurance rate goes up when I haven’t had any accidents and my vehicle is just getting older?
A: I get this a lot from customers and I know it’s frustrating to think that maybe you’re paying more and getting less. However, your auto insurance is a little more complex than just replacing your vehicle and although it’s unlikely you will cause an accident we need your policy to protect you.
When you look at your policy usually the first thing listed is your liability coverage. This will protect you if, God forbid, you are at fault in an accident. Your bodily injury coverage will help pay for things like other persons medical costs, lost wages and pain & suffering. This protects you, your financial assets and your earning potential. Your property damage pays for the other person’s vehicle, guardrails, telephone poles etc.
We also have a couple coverages that are typically present to protect you. Medical payments will pay your medical out of pocket regardless of who is at fault up to its limits. Uninsured motorist and underinsured motorist are designed to provide payment to you for medical costs, lost wages and pain and suffering when it was the other driver's fault but they either didn’t have any or not enough coverage.
So, although part of your premium is based on your vehicle, we have a few other benefits that impact the value of your policy. I know you’ve all heard that there is an increasing number of accidents with the rash of distracted drivers, but rising medical costs and inflation will also put some pressure on your premiums. Advances in auto technology have an impact too. I know I’m old but, I remember when most people had a bumper that was designed to take a bump in a parking lot, without needing any repair work. Today, if you were to back into something there is a good chance your bumper cover will have a hole in it and most people are shocked to find out what mechanics want for fixing it. If a state of the art vehicle is hit it may be even more costly when there are electronics and sensors hidden beneath or around the bumper cover.
While it’s true the value of your vehicle has probably dropped over time, what we see is that many accidents aren’t total losses. When we look at the premium for your collision and/or comprehensive coverage it will also take into consideration the cost to repair your vehicle. Unfortunately, inflation plays a role in the cost of labor and parts for repairs.
Sometimes there are coverage options, discounts or rewards that are available to help combat increases in premiums. I encourage you to schedule time with me to go over your coverage to make sure it is protecting you the way it should. We can also go over any discounts or rewards you may not be aware of. You can call 920-498-3630 or email me firstname.lastname@example.org to schedule your Insurance Review