How much car insurance do you need? If you’ve ever shopped for coverage, you’ve probably asked yourself that exact question. The answer, however, is not as cut and dry as you might think. Insurance is all about shielding your assets and future income against financial damages. With so many different ways you could experience a loss, it is important that you have the right types of coverage, as well as the right limits. In this article, we are diving deep into the types of car insurance coverage and reasons you need ample limits.
Damages to Your Vehicle
Statistically speaking, it is bound to happen sometime. Whether you hit a tree, collide with another vehicle, or suffer weather-related damage, you will probably need to file a claim for repair or replacement of your vehicle. There are only two types of car insurance that cover physical damages to your vehicle – collision and comprehensive. While they both help ensure your vehicle will be repaired if it is damaged, they cover very different types of events.
Collision vs. Comprehensive
There is no need to choose between collision and comprehensive insurance since most drivers need them both. Collision coverage is the part of your insurance policy that pays for repairs to your vehicle after a car accident. The damage must come from a collision-related event, whether with another vehicle, a tree, a curb, or some other object. Comprehensive takes care of damages caused by events other than collisions, such as damaged caused by inclement weather, vandalism, or run-ins with wildlife. It can even cover the cost of replacing your vehicle if it is stolen.
You need only to choose a deductible, which will be the amount you contribute out of pocket toward the cost of a claim. Deductibles come in many sizes from as little as $100-$250 all the way up to $1,000 or more. The bigger your deductible, the lower your premium. However, we never recommend selecting a deductible that is more than you can comfortably afford after a claim.
There are no limits to choose from since insurers pre-determine your coverage based on your vehicle’s valuation. If your vehicle is ‘totaled,’ the insurance company provides compensation for your loss based on your vehicle’s actual cash value. If you happen to have an antique car or collector’s model, your vehicle may instead be insured based on an agreed value.
Do You Need Physical Damages Coverage?
For most people, collision and comprehensive insurance makes sense. For some, it may even be mandatory. After all, lenders who lease vehicles or loan money to finance vehicles typically require borrowers to purchase physical damages coverage. Even if you are not required to purchase coverage for your car, however, you
should still consider adding this important protection to your policy.
Besides your home, your vehicle is likely to be one of the biggest purchases you’ll make. Repairing it can cost thousands of dollars, but replacing it could cost much more. Could you afford to be suddenly without transportation? Would you be able to purchase a new vehicle without affecting your budget or financial future?
Damages to Other People’s Property
You feel a jolt and hear that dreaded crunching sound. You just ran a stop sign and plowed right into the side of a brand new Lexus SUV. The vehicle is destroyed and will need to be replaced to the tune of $55,000. You know you have property damage coverage, but how much? Is it enough to cover the bill, or will you be forced to dip into your savings and income to pay for the damage?
This is the story many drivers face every day. They find out their property damage liability falls short of what they need to cover their financial responsibility for property damage in an accident. The State of Arizona requires all drivers to carry a minimum amount of property damage liability coverage, but it barely scratches the surface of what it would cost to replace a brand new vehicle, much less a luxury vehicle. Sure, the victim’s insurance company may pay for the initial repairs or vehicle replacement, but it is also likely to sue you for recovery of those damages.
Here at Smart Move Insurance, we help Phoenix area drivers determine exactly how much property damage liability protection they need to protect their assets, savings, and future income against lawsuits.
Continue reading part two of “How much car insurance is enough?”