If you’ve ever wondered how much car insurance is the right amount, you are not alone. It can be overwhelming deciding the coverage types and limits for your policy. Just as much as we want to save our clients money, we here at Thiel
So what’s the difference between these two types of coverage, and why should you have both?
Collision – Collision insurance covers the damages to your vehicle after a car accident. Whether you hit a tree, another car, or run into someone’s home, your insurance will help cover the cost of repairing or replacing your vehicle.
Comprehensive – Comprehensive insurance covers the damages to your vehicle that occur due to non-collision events. If you hit a deer in the road or a thief takes off with your car, a tree falls on it, a stone cracks the windshield, a flood or hail damages it, comprehensive insurance reimburses you for your loss.
Do You Need Collision and Comprehensive Coverage?
It is worth noting that many drivers are required to maintain collision and comprehensive coverage according to the terms of their loans or lease agreements. When your car still belongs to a dealer or otherwise serves as collateral for a loan, you may be required to protect the lender’s financial interest in the vehicle.
Limits and Deductibles
When it comes to collision and comprehensive coverage, you either have it, or you don’t – there are no limits to choose from. Car insurance companies insure most vehicles for their actual cash value at the time of the collision or another covered event. The actual cash value is the amount of money the insurance company is willing to pay to repair your vehicle for a covered claim. If the cost of damages exceeds the actual cash value, the insurer will reimburse you for your loss based on the actual cash value of your vehicle. However, if you are filing a claim for an antique vehicle or collector car, you may be insured for an agreed value listed in your policy instead.
While you may not have to select limits for your coverage, you will have to choose a deductible. This is the amount of money you agree to contribute toward the cost of collision and comprehensive claims for your personal vehicle. Deductibles may be as little as $100 or as much as $1,000. The amount you decide on should be a matter of preference and affordability. The higher the deductible, the lower the premiums.
You Damage Someone Else’s Property
If you cause an accident, you might have much more to worry about than repairing your car. If you are at-fault, you could also be responsible for the damages to other people’s property. Here in Wisconsin, drivers are required to carry a minimum amount of property damage liability insurance to help cover the cost of at-fault damages. However, it may not be enough to protect your income and assets against a lawsuit for excess liability.
Consider, for example, a driver who loses control of his vehicle, runs over someone’s fence and totals a brand new luxury vehicle parked in a driveway. The damages total up to $85,000, of which the driver only has the state minimum $10,000 in property damage liability coverage. He is sued for the remaining $75,000, which he has to use personal savings and payments from future income to cover. Had the at-fault driver purchased higher liability limits, the damages could have been covered in full.
Contact our team for a free risk analysis and to find out how much coverage may be right for you.
Continue reading part two of “How much car insurance is enough?”