Auto Insurance: How Much is Enough?

When you are ready to purchase an auto insurance policy, it’s likely you’ll want both affordability and a plan that covers you in nearly every scenario. But how much is enough?
Being adequately or fully covered means different things to different people and is dependent upon your situation. It is important to keep in mind that all insurance policies are contracts with terms and exclusions; no policy covers everything.

Defining Full Coverage
Having “full coverage” means your insurance policy includes Liability Coverage and Physical Damage Coverage—it does not necessarily mean you are fully protected in any situation. If you are at fault in an accident and only have the minimum amount of insurance that is legally required, you may end up paying out-of-pocket expenses.
Liability Coverage varies by state, but in California, the minimum amount drivers must have on their policy is:
  • $15,000 for injury/death to one person
  • $30,000 for injury/death to more than one person
  • $5,000 for damage to property
Physical Damage Coverage protects the policyholders’ vehicle, regardless if it’s moving or parked, from nearly all hazards. This includes, but is not limited to, damage sustained through collisions with other vehicles, theft, fire, flood, earthquakes, vandalism, toppling trees, wayward wildlife, deep potholes and road debris.
In the event of an accident, the Physical Damage Coverage should cover your vehicle up to its market value. However, injuries and property damage to the other party’s vehicle or property will only be covered up to your Liability Coverage limits—and that is the difference between having full coverage and what is truly enough coverage.
When Full Coverage Isn’t Enough
At-fault drivers are responsible for any pain, suffering and injury caused to the others involved in an accident. This can include physical injury, rehabilitation, lost wages, medical costs and even emotional stress. The person at fault is obligated to pay any amount that exceeds the limits of their insurance policy.
For example:
A driver with the legal minimum coverage is at fault in an accident that injures a woman who earns $35,000 annually; causing her to be out of work for a year. The injured woman’s medical bills, lost wages, pain and suffering add up to $100,000. The damage to her car and property are even more.

Because the at-fault driver has only the minimum Liability Coverage and Physical Damage Coverage, his insurance company will pay the first $15,000, and he owes the remaining $85,000—plus the rest of the damages. In California, injured parties have the right to garnish wages up to 35 percent for at least 10 years, or however long it takes for the claim to be paid. At-fault drivers who are self-employed face the threat of having their bank accounts garnished.

Find the Best Coverage at the Right Price
Choosing only the minimum amount of insurance will leave gaps in coverage that could be financially devastating. Make sure you understand the options available to you, and work with an insurance agent who will help you find as much coverage as possible at a price you can still comfortably afford.
If you haven’t reviewed your insurance policy in a while, the specialists at SchoolsFirst Insurance Services are happy to help. Call 800.462.8328, ext. 4309 for a quick, free review of your coverage.
Insurance products offered through SchoolsFirst Insurance Services, LLC., a subsidiary of SchoolsFirst Federal Credit Union. CA Insurance License #0I19344. Insurance products are not NCUSIF insured and are not obligations of or guaranteed by the Credit Union. Insurance products are not available in all states.
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