Are You Protected on the Road?

Auto insurance can be confusing and is not all the same. Having insufficient coverage can leave you and your assets exposed, resulting in bankruptcy. A lot of consumers base their coverage on recommendations of an insurance agent they have never met. Unfortunately, many of these quotes are geared toward lowering the premium without taking your personal situation into account. If you have insufficient coverage you will be held liable for damage you cause. I want to take a few minutes to explain how it works so you can make sure you are properly covered.

 There are three types of auto insurance; Liability, Comprehensive and Collision coverage. Think of these as the basics.

Liability

How much liability insurance should you have? That can be answered in two words—a lot! It is a good idea to have $500,000 worth of coverage that encompasses both types of liability coverage—property damage and bodily injury liability. Both of them cover you for the costs related to fixing the other driver’s car and any property that was damaged from an accident (property damage). In addition, you are covered for expenses related to their lost wages and/or medical bills (bodily injury) that resulted from an accident where you are at fault.

Without liability coverage, you will be responsible for paying out of pocket, the other driver’s property damage and bodily injury costs. These can be extremely high and also lead to insurmountable debt and financial ruin.  Additionally, future wages can be garnished until the Damages are paid in full. 

Explanation of Liability Coverage Limits (for others)

New York State requires a minimum liability coverage of $25,000/$50,000 and $10,000 (25/50/10 as it’s referred to).

The first two numbers represent the amount your carrier will pay for bodily injury. In the example above they will pay up to $25k for bodily injury per person and up to $50k per incident to anyone not in your car injured as a result of the accident.

The third number is the property damage coverage amount.

If you cause an accident, the maximum your insurance carrier will pay to fix something you hit and damage ($10k). If you total a BMW and your limit is $10k you could be sued for the remaining amount. The person you hit can come after all of your assets if they are awarded a judgment for the unpaid remainder (except payments from pensions and retirement accounts, social security income, etc.).

Very often, large companies like Geico, quote low-cost policies with limited protection, without explaining the real risk to the consumer. This is obviously an attractive offer but does not provide the coverage that keeps you safe in an unfortunate situation. Having a broker you know and trust can mitigate your lack of expertise, especially when it comes to protecting your hard-earned assets.

Raising your limits is relatively inexpensive and should be at least $100,000/$300,000 but preferably $250,000/$500,000 for liability and $100,000 for property damage.

Personal Injury Protection

Unlike Liability which covers people outside of your car, even pedestrians, this covers you and the passengers in your car. NYS requires a mandatory $50,000 minimum in Personal Injury Protection (“PIP”). Please consider the Additional PIP, which brings your PIP limits to $100,000.

It is also recommended that you add Optional Basic Economic Loss (“OBEL”) for coverage up to $25,000 covering costs related to health care expenses, lost earnings, and rehabilitation.

 PIP together with OBEL will provide you with up to $175,000 of protection (in NY) for everyone in your car. There is also an option to get these coverages with no deductible.

 Uninsured/Underinsured Motorist

Uninsured/Underinsured Motorist coverage kicks in if the person there is an accident with someone who does not have insurance. Sadly, this occurs more often than you can imagine.

 Making the above adjustments should not increase your premium by much but affords greater protection for you, your family and your assets.

 Collision and Comprehensive Coverages 

This will cover the costs of repairing your car in the event of an accident and will protect you from the high out of pocket costs associated with such repair. After assessing harm to anyone, the car still needs to be repaired or replaced. This is important for that.

Discounts

Don’t forget to ask for a discount! Lots of things help one qualify, like a defensive driving course in the last 3 years, airbags, antilock brakes, a good driving history, new car discount, and more.

I will be running local defensive driving courses in NYC so please feel free to contact me if you are interested.

 One last note on the risks of having too little coverage:

 While doing your best to save money on your car insurance premium, never lose sight of why you have it in the first place. It is to protect you and your finances in the event of an accident, particularly an accident you caused.

 If your coverage is insufficient, you can (and most likely will) be held personally liable for any damages that you caused.

 How much coverage do you need? Consider your assets and then assess your actual risk. If you have substantial assets, then you have more to protect, and thus will need greater coverage.

 If you have any questions or would like me to review your current policy please reach out to me directly at [email protected] or 845-721-0744.