How Much Insurance Do I Really Need?

ELI5: Negligence

How much insurance do I really need? Is the cheapest plan really the best plan? Do you even need insurance in the first place? 

How Does Insurance Work? 

Customers pay their insurance company a premium (usually monthly, semi-annually, or yearly), in exchange for coverage in the event that you cause a crash. When the client causes a crash, the insurance company will pay for the damage caused up to the policy limit. So, if you have a $50,000 policy, that means that your insurance company will cover up to $50,000 worth of damage or injuries to the other person. The insurance company representing the at-fault driver will pay for the damages caused by the at-fault driver. In no-fault states, however, each party’s respective insurance company will cover the medical expenses up to a certain amount—in Utah, PIP covers up to $3,000 worth of medical expenses.  

Should I Get a High Deductible Plan or Low Deductible Plan? 

The deductible is how much you have to pay before your insurance covers the rest. So, if you’re in an accident where you’ve caused $50,000 worth of damage, as long as you have at least $50,000.00 worth of coverage, your insurance should cover the other person’s expenses. If you need your own insurance to fix your car as well, and you have a $5,000 deductible, you’ll have to pay $5,000 before the insurance covers the rest. Usually, high deductible plans are cheaper when it comes to monthly payments but may not be cheaper in the long run when you account for your deductible. However, you’ll have to pay more before insurance kicks in. If you can’t pay the deductible, this could be a problem. Low deductible plans are more expensive monthly but, if you are in an accident, you won’t have to pay as much upfront in order to get your car fixed. When you’re deciding between a low deductible plan and a high deductible plan, it may be a good idea to consider your budget and the kind of car you’re driving. As well as your ability to pay the deductible in the event of an accident. 

How Much Liability Coverage Should I Have? 

There are two types of liability coverage: bodily injury liability and property damage liability. Bodily injury liability insurance will cover medical expenses if you cause someone else to sustain injury. Property damage liability insurance will cover someone else’s property damage if your negligence causes damage to another person’s property. Different states have different requirements for minimum amounts. Generally, the higher your policy limit, the higher your premiums will be, although the difference between the lower limits and higher limits could be as little as a few dollars per month. Driving around on the cheapest policy possible isn’t necessarily the best idea—especially if you have assets that could be seized or liquidated to cover an excess judgment, so if you can afford the higher policy premium, you should pay it. If the damages exceed your policy limit, you could be financially liable for the rest of the damages. Typically, personal injury attorneys do not go after the at-fault party who doesn’t have the financial resources to pay the excess judgment—but if you do have those resources, you could be liable. 

Do I Really Need Uninsured and Underinsured Motorist Coverage? 

While it may not be legally required in your state, it’s a good idea to have underinsured and uninsured motorist coverage. If someone causes an accident, and they don’t have insurance, or only has the minimum amount of coverage, you may be stuck with the bill—unless you’ve got uninsured and underinsured motorist coverage. This type of coverage usually isn’t very expensive per month, but it can make a big difference if you’re injured and the person who caused the crash didn’t have insurance, or didn’t have enough insurance to cover the cost of all your injuries. If you don’t have insurance, and you cause a crash, the injured person’s insurance company may cover their injuries, assuming they have uninsured motorist’s coverage. However, that insurance company will likely go after you to to get payment—even if you don’t have the financial resources to cover it. 

What about Comprehensive and Collision? 

If your car is damaged by an act of God (hail, wind, other natural disasters), vandalized, or stolen, comprehensive coverage may cover the cost. Collision coverage will help cover the cost of damage to your car if you cause an accident or hit a stationary object. While most states do not require drivers to carry this insurance, your lender may require you to carry this insurance. If you’re leasing your car, or your car is financed, there’s a good chance that you’re required to carry this insurance. Your lender will find out if you don’t have this insurance, and they may either charge you a fee, or purchase expensive insurance on your behalf (you will be billed for this insurance). Either way, it will be expensive. 

Contact Moxie Law Group 

At Moxie Law Group, our talented legal team is here to ensure that you get the compensation you need to recover from your injury. If you’ve sustained injury, don’t wait to get the legal information you need in order to make educated decisions regarding your personal injury claim. Contact Moxie Law Group today. 

 

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