Whether you are shopping for a new policy, or already have one in place, there are just some things that you need to know about how insurance works. Here are 5 things everyone should know about insurance.
1. State minimums are a joke
The Commonwealth of Virginia has a set requirement for minimum liability coverage on your auto policy.
If an agency offers (or even suggests) that you get a policy with state minimum liability coverage—RUN!! Run fast and don’t look back!!!
Property damage state minimums are $20,000 and bodily injury minimums are $25,000 per person or $50,000 per accident (total no matter how many people may be involved).
Now, don’t get me wrong, $20,000 is a nice amount of money. I would love for someone to just hand me $20,000! Heck, I would love for someone to just hand me $20. BUT think about it. Your property damage coverage protects you against the cost of any property you damage/destroy in an accident.
Have you taken a look at new car prices lately? Will $20,000 cover the cost of that new SUV that you just hit? Some of these vehicles on the road today are worth more than my first home! Not to mention the cost to repair the guardrail, traffic pole/signs, fencing, landscaping and any other property that was damaged.
What if you are at fault for an accident that results in an injury to the other party that requires significant and/or ongoing treatment. How far will that $25,000 cover you? What if there were 4 people in the vehicle and they all had to receive medical treatment? Have you seen a hospital bill lately?
Does that $25,000 make you feel safe now?
Saving money is NOT worth lack of coverage! It’s like trying to save on your electric bills by lighting your house with candles and heating your bathwater on your outdoor fire pit. Just don’t.
No one ever wants to even think of being in an accident that results in someone losing their life, but unfortunately it does happen. Do you honestly feel comfortable having state minimum coverage to protect you against the claims brought against you to cover the family of that victim?
If someone else was at fault, would your family feel satisfied that their future would be properly protected if they were only offered $25,000 to cover the loss of your life? Not to mention any medical bills that may have also accumulated prior to your death from the accident.
If the damages are over your covered liability limits, that doesn’t mean that it’s just shrugged off. YOU are held responsible for the excess. The person you injured could obtain a judgement against you personally. Your wages may be garnished for what the victim is owed. They could seize your personal assets to cover their loss. That means you could potentially lose your home, your personal property, your vehicle…any assets you have that could offset their loss.
Protect yourself and your family’s well-being by making sure you are sufficiently covered with realistic liability limits. Consider an umbrella policy (Check out my previous blog for more information on umbrella policies) to give your auto and homeowner liabilities even more coverage.
Now, what if you are not at fault, and the person who caused the accident only has state minimums, or maybe even no insurance at all? The bills don’t care that the accident wasn’t your fault. They expect that bill to be paid.
Check your own auto insurance policy. Protect yourself by having underinsured as well as uninsured motorist protection. The limits for these protections generally match your personal liability limits on your auto policy. What does it exactly do? This coverage allows your insurance to kick in to cover what the at fault party may be lacking, up to your auto’s liability limits. Your insurance carrier could then take on the process of subrogation. That pretty much means your insurance carrier will cover your loss, and by doing so, you are granting them permission to act on your behalf to go forward with legal restitution against the other party to compensate their loss.
2. Know your limits. Split vs CSL
So, what are your liability limits?
Before I started working with insurance, I had no idea what split limits were. I had never even heard of a combined single limit.
As agents, we look at these limits on every single auto policy that we produce. It’s our daily normal and sometimes it can be overlooked that not everyone speaks insurance lingo on an everyday basis.
Think about your job. Do you have certain in-house terms that are so common for you that you sometimes forget that people outside of your job have no idea what you are referring to?
Split limits explain the amount of liability insurance coverage on your auto policy. Like mentioned earlier, state minimum split limits are 25/50/20. The first number is the maximum liability coverage for a single person’s injuries due to an at fault accident, basically the medical bills, pain and suffering, etc. for the person you hit.
The second number is the max liability coverage for the entire accident, whether it is 2 or 10 people injured.
The final number is the maximum amount of coverage for property damage liability coverage.
Here at Holley Insurance, we have a minimum standard of 100/300/100 for our split limit policies. If you want state minimums, or even a policy just over that amount, don’t come see us. We are not going to insure someone for limits less than what we feel are acceptable.
But what about CSL??
CSL stands for combined single limit. CSL offers a single dollar amount of coverage that can be used for any liability expense. If you had a CSL policy of $500,000 you would have $500,000 that could be used towards all injuries and property damage for which you are liable. It’s like a bucket of money for you to pull from rather than specified funds of a split limit policy.
3. NEVER have a lapse in coverage
Buying insurance can be a little overwhelming. I get it. You are paying money for something that you hope to never even use.
If your car breaks down and you are bumming rides for a month while the part is on backorder, you may feel tempted to just cancel your policy.
If you sell your car and you haven’t bought a replacement yet, you have to cancel your insurance, right?? I mean you can’t have a policy if you don’t have a car, right??
Having a lapse in coverage will deem you a higher risk with most insurance providers. Even just a few weeks lapsed can make a difference. Going over 30 days without coverage will have a MAJOR impact on your rates.
What do you do then? Each situation has its own special needs. What you need while your car is in the shop or broken down is not going to be the same as what you need if you no longer own a vehicle.
Call your agent. Hopefully you deal with an educated, independent company (like Holley Insurance!) who can give you the advice on what steps to take in your particular situation.
4. Getting your own policy? Roll off of your parent’s policy
Dreams do come true! One day your sweet child, will be on their very own policy that they will pay for with their very own money!
When it is time for your precious child to step up and get their own policy, the first thing to do is to check with your current insurance provider. Most providers offer a “spin off” of your policy. They allow certain benefits and discounts to roll over onto their new policy. In addition to the savings, you also know that your child is getting taken care of by a company that you trust to give them the coverage they need.
Me when my son gets his own policy
5. Is it worth turning in? Every accident and claim will make a difference when shopping coverage
An at-fault accident and collision claims will have a much bigger impact than other claims, but all claims will show up on your claims history.
As an insured, you are held accountable for your loss ratio as well as your claims history. What is a loss ratio? It’s the comparison of the money you have paid in verses the money paid out in claims.
Let’s say for easy math you pay $2,000 a year for insurance. You have had this company for 3 years so that’s $6000 you have paid in. Then you wreck your car. Your car costs $5000 to repair, you have $2000 in medical bills along with the repair and medical expenses of the person you hit—let’s say $10,000 for them. That’s a total of $17,000 spent on your behalf in just one claim. So even though you have been three years without incident, that one accident has already cost the insurance company more than what you have paid in. You would not have a great loss ratio.
If you have a small claim, consider getting a repair quote before turning it in. If you have a $500 deductible and the repair is $400, you will not benefit from reporting it into your insurance.
Even if it was $600 to repair, is it worth losing discounts and potentially having a policy surcharge for a claim that will only get you $100 towards repairs since you are responsible for your deductible?
Some companies do not ask the amount of a claim when working up a quote. They simply want the number of claims made in a certain category. So, let’s say that carrier sorts by under $1000 and over $1000. That above-mentioned example would give you a hit in the “under $1000” box that could potentially impact your annual premium by more than the $100 you got when you turned it in.
“But it wasn’t my fault so it doesn’t count against me.” “It was a deer, I couldn’t help that, so it’s fine.” “I didn’t get a ticket so it wasn’t really an accident.” Doesn’t matter. It was still a claim. Maybe one won’t make a big impact. Kind of like losing $20, it stinks, but you’ll usually be okay just being out 20 bucks.
However, if you lose $20 five different times, that adds up. $100 is a much bigger deal. You have insurance so you can get back to where you were before the loss. I’m not saying never file a claim. Just be smart. If you aren’t sure if you should file a claim, ask your agent. That’s what we are here for!
Let us help you wade through the ins and outs of your insurance policy to make sure that you have the absolute best coverage at the best price. Start your quick quote online here!