DO YOU KNOW WHICH COVERAGES YOU NEED?
Type of Coverage:
There are essentially two types of coverage: coverage for damage to and loss of property, and coverage for personal bodily injury and death.
- Property Damage Liability – this is REQUIRED under Florida Law (minimum of $10,000) – covers damages to other vehicles when you are at fault.
- Collision – covers accident damage to YOUR vehicle, regardless of fault
- Comprehensive – covers damage to YOUR vehicle from things other than accidents (theft, storms, etc.)
- Loss of Use (car rental) – covers a rental while your vehicle is being repaired, regardless of fault.
- Personal Injury Protection (PIP) – this is currently REQUIRED under Florida Law – regardless of fault, it covers 80% of YOUR Medical Expenses and/or 60% of YOUR Wage Loss up to a limit of either $2,500 or $10,000, depending on whether or not your injury resulted in an “Emergency Medical Condition” (EMC).
- Medical Payments Coverage – regardless of fault, it covers the 20% balance of your medical expenses not covered by PIP, up to the limit of coverage purchased.
- Bodily Injury Coverage (BI) – covers injuries to others when YOU are at fault.
- Uninsured/Underinsured Motorist Coverage (UM) – covers YOUR injuries when the at fault party either has no bodily injury coverage or not enough bodily injury coverage.
Amount of Coverage:
When you buy insurance coverage, your auto insurance carrier (or their agent) will offer you different amounts of coverage from which to choose. While the amount of coverages offered may vary from carrier to carrier, the below is are pretty standard coverages that are offered for various types of coverage. How much coverage you need will depend on your personal financial situation. Other than being required by law, why do you need coverage? You purchase insurance coverage to protect your assets. In the case of auto insurance, you are usually protecting your car, your person and your bank account (and any other assets you may have). Remember — and this is IMPORTANT — your insurance carrier will only pay for a loss up to the limits of the coverage you have purchased. If the loss is greater than the coverage, YOU pay out of your own pocket.
Property Damage coverage is usually offered in the form of a “combined single limit.” In other words, one coverage provides a single amount that is the limit for an entire loss (your accident), regardless of the number of people making a claim. For example, Property Damage Liability is required under Florida Law (that is the TYPE of coverage required) in an AMOUNT of at least $10,000. So, if you have $10,000 in PD liability, in the event a collision is your fault, your insurance carrier will pay up to $10,000 for the damage you cause to other vehicles. This means if you damage one car or five cars, they will only pay up to $10,000 in total. Is that enough for you? Depends on whether or not you have any assets you wish to protect. If not, then it may be plenty, because most lawyers and insurance carriers will leave you alone if you don’t have any assets; however, if you own a home, a boat, a jet ski, or have money in the bank or investments, etc., you should purchase more coverage. If you only have $10,000 in PD Liability and you rear-end a Ferrari, and it costs $100,000 to repair, you will owe $90,000. If you have any assets, don’t expect the owner of the Ferrari or their insurance company to leave you alone. They’ll make you pay.
Bodily Injury (BI) coverage usually comes in the form of a limit per person and a limit per accident. Like this:
$10,000/$20,000, or 10/20. This means your coverage limits are $10,000 per person and $20,000 per accident. Under this scenario, if you injure three (3) people in an accident that is your fault, your carrier will pay each of the injured parties up to $10,000, but no more than $20,000 total. They will not pay $10,000 to all three. How much BI coverage do you need? It depends on your assets. If you have $100,000 or more in a 401K, then you better carry a lot of coverage (and maybe even get an umbrella), or you risk having to crack open your piggy bank and paying the piper.
Uninsured Motorist (UM) coverage works the same as BI, but your UM coverage covers you when there is no or not enough BI. How much UM coverage do you need? As much as you can afford. If you have a serious accident and the other driver has no coverage, without a large UM policy, you are going to lose a lot of money. This can be true even if you have good health insurance and a good short & long term disability policy. Example: the accident renders you incapable of returning to work and you need assistance to live and care for yourself (it happens). Health insurance doesn’t cover long term care. Regardless of how well off you are now, you can end up on Medicaid and broke.
Moral: don’t skimp on your auto coverage. Buy as much as you can reasonably afford. You never know when you’ll need it.