Why Should I Carry More Auto Insurance then Legally Required?
By: Eric Kricher (Capstone Brokerage, Private Client Advisor)
There are two types of auto insurance policies… Single limit and split limit. Single limit insurance policies have one cap on coverage should you be in an accident. For example, if you are in an accident, the most the insurance company will pay out is $200,000. That amount of money ($200,000) must cover all expenses involved in the accident — damage to your vehicle and the other vehicles involved, medical expenses, etc. You get one amount of money to cover both property and bodily injury expenses. That amount is all the insurance company is obligated to pay on your accident claim.
Split limit insurance policies offer multiple limits, or limits per type of expense. This kind of coverage usually splits the amount of coverage three ways: One cap for bodily injury coverage, one cap for property damage and one cap for all injuries for the accident. For example, the minimum split in the state of Nevada is 15/30/10, 15,000 for bodily injury, 30,000 for all injuries, and 10,000 for property damage. Many clients call in wanting just this minimum however it is advisable to carry a limit of 100/300/100. Meaning 100,000 for bodily injury, 300,000 for all injuries, and 100,000 for property. In most situations we would prefer our clients to carry 250/500/100.
One of the main reasons we recommend our client have higher then legal limits is to protect them in the event that they cause more damage then their Automobile insurance policy covers. For example, if the limit on bodily injury coverage is $15,000, then the insurance company can only pay that amount of money out on a claim, even if the actual bodily injury expenses total say, $50,000. So who would pay the difference? If you have health insurance that may kick in, or you may be eligible for Medicaid or Medicare however if you aren’t then often times this will come out of your own pocket or you will have to sue the person at fault, assuming that you weren’t the cause. This is the reason why we recommend higher limits.
Paying less on your liability limits means: the lower your limits, the lower your insurance premium. This may sound wonderful at first to make your insurance liability limits as low as possible. But you need to remember that means you will be covered by your insurance for less money in case an accident does happen leaving you in a situation where you have to cover accident expenses out of your own pocket. Paying more on your insurance premium now may feel unnecessary, but paying thousands if an accident does happen will feel much worse. Remember insurance in the simplest terms is passing the risk on to another entity, your insurance carrier.
