Your windows are down, the sun is shining, and you’re reading the most recent MoneyStuff article as you drive home.
Wham!
Getting into a fender is about as fun as going to the DMV. Especially if its your fault. But that’s why you’ve got that insurance, right? Well, if you’re like a lot of us that don’t hit people often, you probably don’t know what’s actually in that insurance policy you blindly pay for each month. Don’t wait to reference your policy until its too late. You’ve worked hard for your money- you want to protect it.
An insurance policy can be confusing. Here are two extremely important coverages you want to be familiar with:
- Property Damage Liability
- Bodily Injury Liability
Property Damage Liability. In Washington State, the minimum property damage liability coverage required to be on the road is $10k. Sounds like a lot, right? Well, not really, considering this is supposed to pay for any damage to another car, fence, lemonade stand, etc. that you may have caused. One fender bender to a Tesla will likely be $20k+. Guess what happens to that extra $10k that isn’t covered? You could be liable for it out of pocket. The good news is, it only costs $2 or $3 per month to raise your coverage from $10k to $100k. Especially if you drive a larger vehicle, you could easily cause more than $10k worth of damage to one or multiple cars in an accident. Give yourself peace of mind and make sure you have at least $50k or $100k (the increments are 10/25/50/100/300k) in property damage liability coverage. If you aren’t sure (like me at the time of my fender bender) go look at your policy online or call your insurance company.
While you’re at it, look at your Bodily Injury Liability coverage. It will read as something like $100,000/$300,000. This format means “per person”/”per accident”. So from that fender bender with the Tesla, you are covered for up to 100k of their medical bills. If they have passengers in the car, you are covered for up to 100k of their medical bills too. Phew, good news. But, it only goes up to $300k total. So if you accidentally hit a passenger bus and 8 people suffered broken arms, just hope that their bills collectively stay under $300k. There are lots of options for how much bodily injury liability coverage to have. If you’re an awful driver with a Hummer and are worth millions, I’d say pay the extra couple bucks and spring for something like $300k/$500k or $500k/$1mil. You don’t need some guy in a neck brace coming after your hard-earned assets in court.
So, while we are all confident in our driving ability, accidents do happen. For the price of one Egg McMuffin per month, you can protect yourself exponentially more than your current level. People don’t usually choose the type of car they hit, so you never know what you could be on the hook for. It’s like a box of chocolates or something.
Your insurance company isn’t going to try and sell you a better level of insurance for only a couple bucks more each month, as it isn’t advantageous to them. So reach out to them and make sure you’re comfortable with how much coverage you have. Oh, and try not to hit anyone.
-David
MoneyStuff 