This post is part two of the blog post that answers the question “How much car insurance is enough?”
Compensation for Harm You Cause Others
Liability goes beyond just property damage. If there are other people involved in an accident you cause, you could have much more to pay for than a few car repairs. It does not matter if circumstances were beyond your control such as a patch of black ice or mechanical failure. What matters is that the accident happened and you may be the majority at fault in it. Injuries can cost many tens of thousands of dollars in medical bills and lost wages, not to mention emotional distress and loss of companionship. Add in the possibility of any punitive damages you face as an at-fault driver, and your financial responsibility for an accident can quickly soar.
Bodily injury liability insurance is designed to protect you against expensive lawsuits by paying for victim injuries up to the limits of your policy. You should choose your bodily injury liability limits carefully, though, since you will be responsible for paying out-of-pocket for any damages more than your limits. The State of Wisconsin has mandatory minimum liability limits, but we here at Thiel Insurance Group recommend that our clients purchase much higher limits to protect your income and assets against a major loss. When one considers the current cap for loss of companionship of $350,000 for an adult and $500,000 for a minor, carrying at least $500,000 of auto liability would seem prudent.
Split Limits vs. Combined Single Limit (CSL)
Your liability insurance could be in the form of a combined single limit (CSL) or split limit, depending on your insurer and your policy. A combined single limit is listed on your policy as a single coverage amount, such as 300 CSL; this means your policy will cover as much as $300,000 in total bodily injury damages per accident, whether that is for a single or multiple victims. A split limit is different, in that it limits the amount of coverage available to each, as well as per accident. Split limits is listed as two separate numbers, such as 250/500; this means the insurance company pays up to $500,000 for total bodily injury per accident, but only up to $250,000 per person who is injured.
Money to Protect You and Your Passengers against Uninsured or Underinsured Drivers
A lot of drivers here in Wisconsin get behind the wheel without insurance, despite laws requiring all motorists to have liability coverage. If you are injured by an uninsured driver or a motorist with too little insurance to cover your losses, how will you afford the medical care you may need, and your loss of income? Uninsured motorist (UI) and underinsured motorist (UIM) insurance each protect you and your passengers against at-fault drivers with insufficient coverage. Uninsured motorist insurance takes care of your injuries if a driver hits you with no insurance, and underinsured motorist takes care of any excess damages that remain after you exhaust the limits on an at-fault driver’s liability coverage.
Money to Help with the Smaller Things
Injuries and property damages are the big expenses in an accident, but there are several smaller expenses that can add up to big financial burdens, too. For example, medical co-pays and deductibles can cost hundreds or even thousands of dollars out-of-pocket in the days that follow an accident. Likewise, towing charges and rental car fees can tack on hundreds of dollars more, quickly depleting funds in your savings account. Most every car insurance policy includes the option of several ‘smaller’ coverage types to help minimize your financial burden after an accident or another covered event. From medical payments coverage to towing and rental car charge reimbursement, these small additions can add up to big savings. Be sure to review your specific situation and needs.
Beyond Car Insurance
Even if your car insurance includes the most coverage available to you, it still may not be enough. In extreme cases, such as accidents that result in a fatality or permanent disability, even a $500,000 liability limit might only cover a fraction of the total damages awarded to a victim. Instead of getting stuck with hundreds of thousands or even millions of dollars in excess damages, protect your income and assets with an umbrella policy. This coverage works by supplementing the primary liability coverage on your policy. Once you reach the maximum limits on your car insurance, umbrella insurance picks up where primary coverage left off, extending your liability protection by an additional $1 million or more. Considering the low cost of umbrella insurance and the extensive asset protection it offers, we recommend all drivers consider adding this coverage to their insurance portfolios.