Standard car insurance is a valuable insurance coverage that is required of every auto owner in every state. In general, standard auto insurance is defined as what the state requires as the minimum coverage. For many people, however, this standard coverage is not enough protection.
In most cases, the standard or minimum car insurance policy is meant to protect only the people who are not at fault in an accident. Most of these policies are designed to pay out for the health care and property damage caused by the driver in the case that he or she is at fault in an accident. The limits on this policy vary by state, but in general they will provide enough funds to cover a moderate accident.
Under a standard policy, however, no money will be paid to cover the damage to the driver’s car, nor will anything be paid to cover his or her health care expenses. This means that the driver is will be responsible for paying for repairs or a new car out of his or her own pocket. Standard policies also offer no coverage against other incidents such as vandalism and theft.
For many people, driving with just a standard auto insurance policy can be dangerous. In all states, when a driver is found to be at fault in an accident, he or she can be held liable for all of the property and personal damage he or she caused. While most victims will make claims against the driver’s insurance policy, once the maximum coverage amount has been reached the driver must pay for any overage out of his or her own pocket.
The truth is, many drivers have discovered too late that the minimum coverage amounts do not provide enough protection. Many states set their minimum coverage levels decades ago with the intent that they would provide enough money to replace the property damaged and take care of the health care needs of accident victims. Over time, however, these minimum coverage amounts have been able to provide a lot less care and protection as inflation has eroded the purchasing power of this amount of money.
Many states, for example, set their minimum coverage level around $100,000. While this may seem like a lot of money, consider the effects of an accident that totals both vehicles and puts one of the victims in the hospital for two days. The medical bills alone from this can cost hundreds of thousands of dollars. Even replacing a totaled vehicle can cost over $50,000 because the driver is also liable for paying for a rental car and even taxes on a replacement vehicle while the injured party finds a new car.
The minimum coverage in this example would probably only cover a fraction of the medical bills. After this, the medical bills will be covered by the driver. By law, a court is allowed to seize assets from the driver and sell them in order to pay the bills. These assets can include cars, cash, jewelry, real estate and in some cases a driver’s pay checks can be garnished to pay for these bills. For this reason, any driver who has seizable assets should invest in additional auto insurance coverage beyond the standard limits.
It is recommended that drivers with moderate assets (usually this means savings that have taken more than a year to accrue) have at least $500,000 in coverage, while drivers with significant assets get a policy with a million dollars or more worth of coverage. This will provide enough coverage to pay for the medical bills and property damage that can occur even in a serious accident.
Furthermore, a standard auto insurance policy will provide no money to help repair or replace the driver’s vehicle, nor will it pay for the driver’s medical costs. A collision policy will pay for these damages, however. In cases where a car is financed, this coverage will often provide enough money to pay off the old loan and in some cases even provide some extra funds to purchase a new car. In fact, many auto finance companies require their borrowers to hold a collision policy on any car they currently have a loan out on. At the very least, collision coverage provides money to get the driver’s car fixed and will even pay for a rental car while the car is being repaired.
An additional coverage that many people need is comprehensive auto insurance. This insurance provides funds in the case of theft, vandalism, or damage caused by a natural or manmade disaster. People who live in areas that are prone to events such as hurricanes or tornados have found this coverage to be very important, since it is the only insurance that will pay to repair or replace a damaged vehicle. This coverage also covers cars and trucks that are stolen or vandalized, making this an important coverage for people who do not garage their vehicles at night.
Unfortunately, the main reason why consumers choose not to upgrade their standard auto insurance policy to these additional coverages is that they believe they cost too much money. While it is true that upgrading an insurance policy will cost some money, many consumers are surprised to learn it only costs a few more dollars a month.
For consumers with assets and/or a family to protect, a couple extra dollars a month is a small price to pay to make sure that everyone is protected in the event of an accident. Every year, millions of people file for bankruptcy, and auto accidents have historically been in the top five reasons that consumers cite for needing to file. Not having adequate insurance coverage means that a consumer’s family is at risk of being sued after an accident and losing everything they have saved.