Why Auto Insurance Matters So Much
Everyone likes to pride themselves on their driving skills but even the best drivers can make mistakes. It is therefore essential to have insurance in place to ensure that if the worst happens it needn’t be the end of the world, even if you are at fault.
There are several components to an auto insurance policy, not all of which are automatically included. Generally speaking the more benefits a policy offers, the more expensive it will be. However, in the event that an accident occurs the additional benefits could be invaluable.
Collision coverage is an optional part of a policy which pays for any damage sustained to your vehicle in a crash, irrespective of who is at fault. If the vehicle cannot be repaired, it covers the cost of replacing it, minus the deductible.
Comprehensive auto insurance ensures that no matter how the damage occurs, the policy will cover it.
There are two different kinds of medical cover, personal injury and medical payments, which can help towards your medical costs and those of your passengers if injuries are incurred in an accident. The accident does not have to be dramatic to cause personal injuries. For example, whiplash has been shown to occur in accidents at speeds of just 3 mph.
Personal liability coverage for bodily injury and property damage is a mandatory requirement in most states and pays out damages and costs if injuries occur or property needs repairing.
A particularly useful benefit to include in an auto insurance package is that of uninsured and underinsured motorists cover. This means that if the other driver is uninsured or has insufficient insurance to pay for injuries or damage sustained, your own insurer will pay costs and compensation. However, in the event of a claim that is your fault, the insurer will pay out the settlement via the personal liability cover. Personal liability is a requirement which is compulsory in more or less every state across the US but the minimum amount of coverage varies. If you were the driver at fault, personal liability coverage ensures that any damage to property is paid for as well as compensation for any injuries sustained by the other driver or passengers.
It can be tempting to skimp on an insurance policy and keep the monthly premium as low as possible—after all, no-one likes to spend their paycheck on insurance. However, failure to have adequate personal liability insurance in place can have devastating financial consequences in the long run.
If the coverage on the insurance is not sufficient to coverage the amounts being claimed by the other party, they may be able to claim on their own policy. However, they can also pursue you personally for the money which, if successful, can result in money being deducted directly from your paycheck or even a recovery from your assets.
Quite apart from the immediate impact of having to pay out for costs, the financial implications can be far-reaching. At the point at which you next renew your auto insurance, you will invariably find that the premium will have increased as a result of the claim. Depending on how long you have been claim-free, the increase can be significant.
If personal liability insurance was not adequately in place and a recovery of assets of some kind has been made, this will be recorded in your credit history. This means that loans and credit card applications may be refused for some time to come, or a higher interest rate applied. Insurance, both home and auto, is also partly based on a credit record and a poor score will add further dollars to your premiums.
A claim for personal liability can be time-consuming as well as emotionally draining. The payment awarded to someone claiming for personal injuries is calculated in part upon the level of suffering the victim endured and how much evidence can be obtained to prove the extent of their pain or injuries. If the individual needed numerous appointments with physicians, took medication for a protracted length of time or had any kind of scarring or permanent damage, any personal liability payout is likely to be much higher.
As well as the physical effects, a personal liability claim will also take into account appropriate compensation for any emotional distress caused. As an example, if the victim broke a leg and was in a wheelchair and thus unable to tend to their children, this would have caused a fair amount of inconvenience and upset, all of which may have to be paid for.
Other costs that can be claimed under personal liability include consequential expenses incurred as a result of the accident including loss of earnings. Severe injuries which have some degree of permanency can carry a heavy liability stretching into hundreds of thousands, sometimes millions, of dollars, all of which will have to be covered from personal resources if there is inadequate personal liability insurance in place. Personal injuries incurred as a result of an auto accident are very common. Statistics from the National Safety Council show that over a four year period, 2,699,000 injuries occurred.
A common misconception is that, providing the insurance policy is up to date, it doesn’t matter too much as to which party was at fault. This is far from being the case with at-fault drivers routinely sued for hundreds of thousands of dollars.
For those looking to reduce the costs of their auto insurance, reducing the level of personal liability coverage is not the way to go. All states have a minimum amount and whilst this would be sufficient for some accidents, for those in which there are more severe personal injuries, the sum is unlikely to be adequate. In the overall scheme of things, coverage is relatively cheap protection and is simply not a cost worth avoiding.
A more appropriate way in which to save some money is by considering scrapping comprehensive coverage—especially for older cars. This coverage can be relatively expensive and there comes a point at which it is no longer financially worthwhile. In doing so, however, do check that all other elements of your car insurance policy, including personal liability, will remain in place.
