How Much Car Insurance is Enough: Collision and Comprehensive Coverage

In Parts 1 and 2, we talked about deductible and liability coverage.  There are two other coverages that you should consider.

Collision & Comprensive Vehicle Insurance

You may remember that liability car insurance covers the medical and property damages to others. Collision Car Insurance covers your vehicle such as if you hit an object like a fence or pole.  It also covers damage to your car if someone else hits you, and they do not have liability insurance. Collision car insurance also covers your vehicle if you are at fault.

Comprehensive covers other damages.  If your vehicle is stolen and not recovered, that is covered under comprehensive.  It also covers damages from weather (tornado, hail, etc.), floods, fire, falling objects, explosions, crashes with an animal (such as a deer) and even riots and civil disturbances.

Do I need Collision or Comprehensive vehicle coverage?

This decision is really up to you.  Our experience has been that most people drop collision or comprehensive (or both) when their car’s value drops below $2,000-$3,000.  It is simply a matter of value.  Add the premium to the deductible if you should have an accident.  If the total is greater than the value of the vehicle, some people choose not to get collision and/or comprehensive coverage.

There are some situations where we recommend getting collision and comprehensive coverage.  These include:

  • If you take out a loan to buy your car, the lender may require these coverages.
  • If you lease your car, the leasing car may require these coverages.
  • If you cannot afford to replace or repair your car if you crashed or it was stolen.
  • If your area has a high incidence of car theft, vandalism or the other situations described above.

I’m just not sure about all these coverages. What do I do?

This question is why we are here for you.  Click here to contact us or give us a call at 865-922-3111 or 800-624-3339.   We can provide the information to help you make the best decision for the right coverage at the right price.  In addition, because we are an independent agency, we can show you quotes from many different insurance companies so that you can choose the right one for you.


How Much Insurance Do You Need?

Low vs. High Deductible
Liability Insurance
Collision and Comprehensive Coverage

How Much Car Insurance is Enough: Liability Insurance

In Part 1, we discussed deductibles and what you should consider regarding a low vs. high deductible.  A second very important part of your vehicle coverage is liability.

What is Liability Insurance?

Liability car insurance covers damages to another person that result from an accident you cause.  It is one of the most base types of coverage and is also mandatory in every state.  The actual minimum limits of coverage can vary state-to-state.

Understanding Liability coverage

Liability coverage is represented by three numbers.  It might appear as 25/50/15 or 100/300/100.  Knowing what these numbers mean is very important.

The first number is maximum paid for “bodily injury” to the other person per accident. (Think in terms of medical expenses for this one.)

The second number is the “maximum paid per accident.” Add up all the costs the insurance pays, and it cannot exceed this amount.

The third number is the maximum paid for “property damage” to the other person’s vehicle as well as any other property damage done (such as fences, guardrails, buildings, etc.)

How much Liability Insurance Coverage do I need?

Although the minimum limit may be lower, a very common liability amount chosen is 50/100/50.  However, we recommend that you make your liability coverage as high as you can afford.   It’s in your interest to do so.

Let’s consider if you were in an accident in which you totaled the other person’s vehicle.  Costs might include:

  • The vehicle
    According to USA Today, in 2014 the average used car price was almost $17,000.
  • Ambulance to the hospital to get checked
    Ambulance rides can cost from $500-$2000 depending on where you are and what is required.  The L.A. Times reported that one lady’s insurance company covered $750 for her ambulance ride and she had to pay over $1500 for the rest of the cost.
  • Medical Costs (emergency room, hospital, x-rays, tests, etc.)
    One of our customers spent just one night in the hospital last fall.  By the time all the costs were added up, the bill was over $9000.  That’s just for one night to get checked out and monitored.

While all of these are very general numbers, they add up quickly. Liability costs from an accident can quickly reach $25,000 or more.  If you are carrying the Tennessee minimum (25/50/15), all those expenses would be covered.  However, what if it was a new car worth $35,000?  What if there are extensive injuries requiring a several nights stay in the hospital followed up by physical therapy and other doctors visits.  With the minimum coverage, the maximum the insurance pays is $50,000.  You are liable for the rest.

Being Realistic

We are not trying to be scary here.  It’s important to be realistic about what liability can mean. Your budget may determine how much coverage you carry. However, if you have the ability to carry more, we recommend that you do.

Our hope, of course, is that none of us has an accident.  How much Liability Coverage should you have?  Talk to your insurance agent about the right amount for you.  They can answer any questions you have about it as well.  If you would like, contact Bob Johnson Insurance.  We have several experienced agents who can help you decide what is right for you.


How Much Insurance Do You Need?

Low vs. High Deductible
Liability Insurance
Collision and Comprehensive Coverage

How Much Car Insurance is Enough: Low vs. High Deductible

Many questions come to mind when you are getting your car insurance.  Questions like:

  1. What do all these numbers like 100/300/100 mean?
  2. What is an umbrella policy and do I need it?
  3. How much coverage do I really need?

That third question is one that we all face.  We know how much we want to pay — as little as possible so it doesn’t hurt the budget too much. We know how much the highway patrol requires — hopefully.  However, that might not be enough.  Let’s take a look.

Low Deductible vs. High Deductible

The most commonly chosen deductible for vehicles is $500.  We recommend, however, that you should do a break-even analysis.  You might consider raising your deductible to save money. The national average for car claims is 7 years.  Divide the change in deductible by the amount of savings. If it is greater than 7 years, it’s probably not a good thing to do.

The actual savings of raising your deductible can vary from one insurance company to the next and it depends on too many variables for us to actually use accurate numbers here.  However, let’s make up some numbers.

If you raise your deductible to $1000 per year, let’s say that saves you $50 per year.  Your break-even:

$500/$50 each year = 10 years to break even

The national average of having an auto claim is 7 years, so that’s probably not a good thing to do.  But what if raising your deductible saved you $150 per year?

$500/$150 each year = 3.3 years

Raising your deductible might be a good idea in this case.  You should contact us to get actual rates.  In addition, our experienced agents will be able to help you choose exactly the best coverage for YOU.  (And we’re also happy to answer all the questions you may have about it!)


How Much Insurance Do You Need?

 

Low vs. High Deductible
Liability Insurance
Collision and Comprehensive Coverage