How much car insurance should you purchase? If that question has ever crossed your mind, you are not alone. Many Minnesota drivers have come to us wondering the same thing. Here at the Andreotti Agency, we know that every driver’s coverage needs are different. In this article, we explore the importance of having the right types of coverage, as well as the right limits.
Your Vehicle is Damaged, Stolen, or Destroyed
When a vehicle is damaged, stolen, or destroyed, the financial fallout can be serious. Auto body repairs often cost thousands of dollars, and replacing a vehicle altogether can be much more. You hope it never happens to you, but if it does, it helps to know your insurance has your back. To protect your vehicle against physical damages, you will need both collision and comprehensive insurance to get you rolling again.
Collision vs. Comprehensive: What’s the Difference?
Collision and comprehensive insurance both cover damages to your vehicle, but they vary based upon how the damages occurred. Collision takes care of damages caused by an accident, whether it involves multiple vehicles or only yours. Comprehensive insurance takes care of events other than collisions, such as fire, theft, vandalism, weather-related damage, and run-ins with wildlife.
There are no coverage limits to choose from for collision and comprehensive coverage. If your vehicle is deemed a total loss, your insurance policy will reimburse you based upon the actual cash value of your car. Exceptions are made for antique cars and collector vehicles, which may instead be covered for an agreed upon value.
Regardless of the size of your claim, all collision and comprehensive damages are subject to your deductible. This is the money you are responsible for paying out of pocket toward the cost of every covered claim. The amount of your deductible is up to you and typically ranges anywhere from $100 to $1,000. If you choose a high deductible, your insurance company may reward you with lower premiums. Just make sure you do not select a deductible amount that exceeds what you could reasonably afford to pay in the event of a claim.
Do You Need Collision and Comprehensive Coverage?
We recommend collision and comprehensive coverage to anyone who wishes to protect the investment in their vehicle, as well as those who cannot afford or otherwise would not prefer to purchase another vehicle out-of-pocket if theirs was damaged, destroyed, or stolen. Keep in mind that while state law requires neither collision nor comprehensive coverage, they may be required to satisfy the terms of vehicle financing or a lease agreement.
You Damage Property that isn’t Yours
In Minnesota, you must have car insurance that covers property damage liability. The purpose of this coverage is to reimburse other people for their losses if you damage their vehicles or other property while driving. Though Minnesota requires a minimum amount of property damage liability protection ($10,000), it may not be enough to shield your income and assets against a lawsuit if you cause an accident. Consider the following example:
A man is commuting home from work when he runs into rush hour traffic in St. Paul. An accident occurs on the freeway, causing traffic to screech to a halt. Not able to stop in time, he slams into the back of a brand new Cadillac Escalade, crumpling it beyond repair. The driver’s insurance company initially pays to replace the vehicle but then sues the at-fault driver for $75,000 as compensation for the damages. With only the state minimum property damage liability coverage, the driver is personally responsible for the remaining $65,000, which may be recovered via savings accounts, liquidation of assets, or garnishment of future wages.
If you found yourself in this scenario, would you have enough insurance coverage to pay for your financial liability? One of our team members will be happy to help you assess your property damage liability insurance needs and make a recommendation for coverage that is right for you.
Compensation for Harm You Cause Others
Car accident liability extends beyond the damages you cause to someone’s personal property. If you cause harm to one or more victims in a car accident, you could be legally and financially responsible for their injuries, as well. Injury-related lawsuits can result in judgments or settlements valued at hundreds of thousands of dollars for compensation for medical bills, lost wages, and emotional distress. At-fault drivers may also face punitive damages due to negligence and legal infractions.
In Minnesota, all car insurance policies include coverage for bodily injury liability. This important coverage helps pay for your financial liability due to injuries you cause as an at-fault driver. The state mandates that all drivers carry at least the minimum required coverage, but we here at the Andreotti Agency recommend our Oakdale area customers purchase high-limit liability protection to safeguard against a major lawsuit. If your limits are too low, you are still responsible for paying any remaining damages that exceed your coverage. That could put your personal income, savings, assets, and financial future at risk.
Split Limits vs. Combined Single Limit (CSL)
When you purchase your car insurance, you will decide how much bodily injury liability insurance to include in your policy. Your insurer may offer you a combined single limit (CSL) or a split limit. Both offer valuable bodily injury liability protection, but the difference is in how compensation is distributed to victims.
A combined single limit appears as a single number on your policy that indicates the amount in thousands the insurer is willing to pay for all bodily injury liability combined in an accident. A 300 CSL, for example, pays up to $300,000 for all victims combined. A split limit appears as two different numbers on your policy, indicating in thousands the amount the insurer is willing to pay in bodily injury liability damages per victim and accident. A 250/500 split, for example, pays up to $250,000 per individual and $500,000 total compensation per accident.
Money to Protect You and Your Passengers against Uninsured or Underinsured Drivers
Minnesota car insurance includes a very important coverage called personal injury protection (PIP). This is the primary form of coverage for any injuries you and your passengers sustain in a car accident, regardless of who was at-fault. PIP comes with minimum coverage requirements, although you can select higher coverage if you prefer.
Of course, PIP does not necessarily remove financial responsibility from an at-fault driver who injures you and your passengers. If you are hit by an uninsured driver, recovering compensation for your damages may be difficult. With uninsured motorist protection (UI), you can protect yourself and your passengers if you are injured in a hit-and-run or by an uninsured driver. We also recommend underinsured motorist protection (UIM), which helps cover injury-related expenses that exceed the low limits on an underinsured driver’s policy.
Money to Help with the Little Things
To accurately estimate the costs after a collision, you must include the small expenses, too. That includes towing expenses and the cost of temporary transportation. Here at the Andreotti Agency, we can offer enhanced coverage options to help pay for the ‘little things.’
Beyond Car Insurance
If you choose the right limits and coverage, your car insurance policy should provide financial protection against most collision-related losses. However, there are some extreme cases in which even the highest liability limits fall short of covering a major settlement or judgment. In these cases, an umbrella policy can provide supplemental liability protection beyond the limits of your car insurance policy.
For example, imagine being sued for $1.25 million after you cause an accident that permanently disables a victim. You are responsible for emotional damages, current and future medical expenses, and the loss of future wages. Your car insurance covers $250,000 for the victim’s bodily injury liability, but you are still responsible for another $1 million in damages. For most drivers, that could mean complete financial devastation. With an umbrella policy, you would owe nothing, as your extended liability would cover the excess damages up to the limits of your policy.
Umbrella insurance is affordable and typically comes with coverage limits of $1 million or more. For more information about umbrella insurance or to find out if it’s right for you, contact our office today.