When you need to file a claim against your car insurance policy, the last thing you want to find out is that you are underinsured. Here at Frydach Insurance, we know the importance of having the right types of coverage and adequate limits. If you are wondering how much car insurance is ‘enough,’ there is no cut-and-dry answer. Instead, your policy should be customized to minimize your individual risk exposure and fit your needs. In this article, we will explore the various types of car insurance coverage and why having the right limits is essential.
Physical Damage Coverage for Your Car
Vehicles are one of the biggest purchases most people make in their lives. Chances are you have a lot of money tied up in your car, whether you lease it, finance it, or own it outright. If something were to happen to it, could you afford to pay thousands of dollars for repairs? Worse, could you afford to absorb the loss of the vehicle and purchase an entirely new method of transportation if your vehicle were stolen or totaled?
Collision and comprehensive insurance help cover physical damages to your vehicle. Both will pay for repairs or otherwise compensate you for the loss of your vehicle if it is damaged beyond repair. If your vehicle is a total loss, you are likely to be compensated based on its actual cash value unless you own an antique or collector’s vehicle, which may be reimbursed based on an agreed value.
While collision and comprehensive provide similar benefits, they are two very different types of coverage. So what is the difference between them? Per the name, collision insurance covers damages to your vehicle when collisions cause them. It could be a single-car accident involving only your vehicle, or it could be damages stemming from a multi-vehicle accident. Comprehensive insurance covers damages to your vehicle that are caused by events other than collision. Examples include theft, vandalism, hitting a deer, or suffering hail damage.
You Need Both
Drivers benefit from having both collision and comprehensive coverage – not one or the other. Though the State of Wisconsin does not require physical damages coverage by law, lenders often mandate it as part of a lease agreement or within the terms of a loan. Even if you are under no obligation to purchase collision and comprehensive insurance, you should still consider adding this important coverage as a means of protecting the investment you have in your vehicle.
Insurance companies typically require drivers to pay a deductible when a claim is filed for collision or comprehensive damages. The deductible is an amount you select when you purchase your policy and could range from as little as $100 to as much as $1,000. If you need help selecting a deductible, one of our helpful team members will be happy to assist you. A higher deductible will result in a lower car insurance premium. However, we do not recommend a deductible that exceeds what you could easily afford to pay out of pocket in the event of an unexpected claim.
Coverage for Property Damage Liability
If you damage someone else’s vehicle or property while driving your car, you could be held financially responsible for the damages. When it comes to liability protection, having the right coverage is not only important, but it could even protect you against a lawsuit.
The property damage liability coverage on your insurance policy will take care of damages you cause up to the limits selected on your policy. Wisconsin requires that all drivers carry a minimum amount of property damage liability protection. Unfortunately, those limits are typically too low to fully protect the average driver against the financial fallout from an accident.
For example, if a driver crosses the median of a highway and hits a brand new luxury SUV head-on, the damages could total tens of thousands of dollars. With only the state minimum of $10,000 in property damage protection, the responsible driver could be forced to liquidate savings or make payments from future income to satisfy the liability.
Check back with us next month for part two of this article, where we will cover liability coverage on your personal auto policy.