Purchasing the proper car insurance can help save you time and money if you experience a serious accident. The amount of car insurance required varies by individual depending on the value of their assets. In other words, car insurance is highly dependent on each individual’s financial situation, so it’s important to determine how much car insurance you’ll need.
What is liability insurance?
Liability coverage is responsible for repairing damage or treating injuries that you’re at fault for in an accident. The two main types of liability insurance are body injury liability and property damage liability. While body injury liability covers medical expenses and lost wages for others injured by an accident you caused, property damage liability pays to repair other individuals’ vehicles and property.
When a driver is sued for an accident, liability insurance protects their assets from being sold. However, liability insurance only covers up to the limits stated in the driver’s car insurance policy. As a result, the driver is required to pay for the rest.
Other types of insurance
Most states require car insurance policies to cover more than liability. There are multiple other types of coverage, which can help pay for injuries or lost wages following an accident regardless of fault. For instance, personal injury protection insurance pays for lost wages and minor injury treatment to those who were at fault for an accident.
Another type of coverage, medical payment coverage, is often limited to below $10,000 and can help pay for the at-fault driver’s injuries. It’s important to keep in mind that medical payment coverage only covers injuries stemming from an accident. For instance, if you suffer from poor eye health, you’ll need to supply proof that it was caused directly by the accident in order for compensation. Although $10,000 may seem low, your local health information exchange organization can help you find high-quality, low-cost healthcare providers in your area after sustaining injuries in an accident.
The amount of liability insurance you need is dependent on the assets you need to protect. If you don’t have any assets to protect, you can afford insurance with low limits on liability coverage. However, if you’re a homeowner with savings, you’ll need liability insurance with limits high enough to cover their value.
In order to determine the value of your assets, add the value of your home, cars, savings, and investments. Next, subtract your debt to calculate your net worth. Your total bodily injury limits should, at minimum, match your net worth. Car insurance limits typically come in increments between $50,000 and $100,000, so find a company with limits slightly above your net worth.
Excess liability insurance
Most companies set a maximum for the amount of coverage you can buy on a car insurance policy. Typically, maximum limits are $250,000 for injuries per individual, $500,000 for total injuries per accident, and $100,000 for property damage. If you need more coverage, consider purchasing excess liability insurance. Excess liability insurance, also known as umbrella insurance, can help pay for costs that exceed limits on your insurance policy.
Although purchasing excess liability insurance often requires buying the maximum coverage offered by an insurance company, excess insurance is relatively inexpensive. According to the Independent Insurance Agents and Brokers of America, a $1 million to $2 million policy can cost less than $400 a year.
If you have any questions regarding insurance coverage, don’t hesitate to contact a local personal injury lawyer or insurance agent. To find a nearby personal injury firm, conduct a simple location-specific Google search, like “personal injury law firm toronto.” All in all, buying car insurance can seem stressful, but purchasing the proper coverage can go a long way in protecting your assets after an accident.
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