How Full Is My ‘Full Coverage’ Auto Insurance Policy? (Part 4)


Protect yourself phrase handwritten on school blackboardIn this series, we spoke about how GAP insurance can help cover total losses, how having coverage for aftermarket parts and car modifications can help cover possible holes in your policy, and how having coverage for a rental car and towing costs can make your life easier while you and your insurer sort out a claim. In this part of the series, we’ll talk about whether your “full coverage” policy’s coverage levels will fully pay for other people’s damages that you’re responsible for.

We’ve discussed that the term full coverage generally describes a policy that meets a state’s legal requirements and also insures the vehicle against physical damage. But what if a state’s required coverage levels aren’t enough? In many states, a policy that meets the legal minimum requirements
won’t provide enough to cover serious accident situations.

Dangers of Having Minimum State-Required Liability Limits

Just about every state requires motorists to carry some form of liability coverage to pay for other people’s bodily injury or property damages they cause while operating a vehicle. Meeting your state’s liability coverage requirements may allow you to drive your car legally, but it doesn’t always mean you’re fully covered after an accident.

Many states have very low auto insurance requirements. Take Ohio, for instance. The state requires drivers to carry bodily injury liability limits of $12,500 per person, $25,000 per accident, and $7,500 in property damage liability (12.5/25/7.5), which are among the lowest in the nation. Causing a serious accident while carrying these limits could leave the vehicle owner in a situation where they’d have to pay for damages with their own assets once their coverage runs out.

The Ohio Department of Insurance has stated that, “If you do not have adequate coverage, the law allows the victim to take any assets that you may have in order to cover the costs of any damages that occur.”

Settling for the bare minimum allowed by states can mean that you could possibly be sued and have your assets taken.

Even in states that have high requirements, like Maine and Alaska — which both require bodily injury liability limits of $50,000 per person, $100,000 per accident, and $25,000 in property damage liability (50/100/25) — you may want to consider getting more protection.

Consumer guides will often suggest that you try purchasing limits of 100/300/50.

Advantages of Adding Adequate Uninsured Motorist Coverage

Your state may require you to carry liability insurance to pay for injuries and damages you cause to others, but another valuable form of protection may not be required: uninsured motorist coverage. Several states require it, but others allow drivers to either go without it or reject it in writing when purchasing policies.

If your state requires uninsured motorist coverage, you may need more than the required levels. When required, it’s often at the same levels as bodily injury liability, and both cover virtually the same thing: injuries after an accident. But, unlike liability policies, this covers your injuries in cases where the person who caused the accident was uninsured, underinsured, or unidentified. Consider raising your limits just as you would your liability limits.

If you live in a state that doesn’t require this coverage, consider buying it. You could probably add this form of protection for a relatively cheap premium, in some cases less than $10 a month.

Consider Upping and Adding Coverages

There are several options when it comes to auto insurance policies, and you should consider the costs and benefits of purchasing the optional ones and of upping the limits on the required ones.

Some states require motorists to carry personal injury protection (PIP), also called med-pay or medical expenses coverage, but if you don’t live in one of those states you may want to think about adding it. This will cover the injuries you suffer in an accident no matter who’s at fault. So if you were to hit an inanimate object and tweak your neck and need to see a doctor, you’d be covered, up to the limits you purchased; neither bodily injury liability nor uninsured motorist coverage would cover it.

When you’re shopping for car insurance, don’t brush off the option to get more protection. You should at least get a quote for a policy with higher coverage. Many times shoppers are surprised to see that they can get quite a bit more coverage for not much more money.

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