Car insurance can be a tricky thing. Here at Gutman Insurance, we get a lot of questions, such as “How much car insurance is right for me?” or “What types of coverage should I have on my policy?” While no one wants to overpay for too much coverage, being underinsured could prove to be far more expensive. When it comes to your insurance policy, remember that it is there to protect you against a major financial loss. In this article, we will explore reasons you need the right types of coverage, as well as adequate limits.
Money for Your Lost, Stolen or Damaged Car
Most Wisconsin drivers depend on their vehicles for transportation year-round. Whether you need it for your daily commute or use it for errands and leisure, what would you do if it were stolen, damaged, or destroyed due to an accident or some other event? Without personal vehicle coverage on your car insurance, you might have to pay for damages out of your pocket and may even have to find another vehicle or alternative transportation. With collision and comprehensive protection, you can relax knowing you will be back on the road in no time.
What are Collision and Comprehensive?
Collision and comprehensive coverage work together to make up the physical damages portion of your insurance policy. They both pay for repair or replacement of your vehicle, only for different circumstances leading up to your loss. Per the name, collision insurance covers damages to your vehicle stemming from a collision. Comprehensive insurance covers the ‘rest,’ as in events other than collision. This might be theft of your vehicle, vandalism, or even damage caused by a weather-related event.
When you file a claim for damages to your vehicle, you may be required to pay a deductible toward the cost of your damages. This is the amount you select when you purchase your policy, often ranging somewhere between $100 and $1,000. Your deductible is a matter of personal preference and budget. A lower deductible means that you will pay less out of pocket in the event of an accident, while a higher deductible could translate to lower car insurance premiums.
When you file a claim for collision or comprehensive damages, your insurance company will assess the damage to your vehicle to determine whether it should be repaired or replaced. If your car is damaged beyond repair, the insurance company is likely to compensate you for the loss based on its actual cash value. If it’s an antique vehicle or a collector’s car that is damaged, your policy may instead cover your vehicle for an agreed value.
Do You Need Collision and Comprehensive Coverage?
Though not required by state law, it is worth noting that most lenders will require borrowers to maintain coverage for physical damages when leasing or financing a vehicle. At Gutman Insurance, we recommend collision and comprehensive insurance to any policyholder who wishes to protect the value of his or her vehicle, as well as those who do not wish to pay for another vehicle or alternative transportation out-of-pocket in the event of a total loss.
Money for the Property Damage Liability
When you operate your vehicle, you take on the risk that you could damage someone else’s property. If you cause an accident or lose control of your vehicle, you could be held financially responsible for any ensuing losses. The State of Wisconsin requires that all drivers carry a minimum amount of property damage liability – currently $10,000.
For a minor accident, such as a small fender bender, $10,000 might be enough to take care of the damages. However, things could get quickly out-of-hand if you cause a multiple-vehicle collision, hit a high-value luxury vehicle, or damage someone’s home or business. In these cases, the owners of the damaged vehicles or property can pursue you personally for compensation of damages that exceed the limits on your liability insurance. Even if a victim’s insurance company initially pays for the damages, the insurer can still sue you to recover the costs.
Continue reading part two of “How much car insurance is enough?”