Is Your Car Insurance Enough?

Friday, November 24, 2017

Is Your Car Insurance Enough?

Written by Malman Law, reviewed by Steve J. Malman.

Owning your very own car means freedom, adventure, and no more hassles of relying on public transportation, friends, and family for getting you to your destination. A car of your own also gives you more options when it comes to financially supporting yourself or your family. Now, you have a vehicle that takes you to and from work, school, and lets you attend social activities.

While there are plenty of things to love about car ownership, it is essential that you also know your obligation as an owner. The state of Illinois requires that you carry adequate car insurance. But for the sake of you financial and physical health you need much more than the bare minimum on your car insurance.

Driving without insurance will not only result in a ticket, but will also make you financially liable for any injuries or damages you cause if you are in an accident. Therefore, it is important to have the right amount of coverage.

What Does the State of Illinois Require for Car Insurance?

The state requires that you carry two types of motor vehicle insurance: liability/body and property.

• Property: The property portion of your automobile insurance covers damages to another party’s property, including their vehicle, third party private party items (i.e., fences, yards, mailboxes, and decorations), pets, and personal items inside the other party’s car.
• Liability and Body: The liability and body insurance covers injuries or deaths in an accident caused by your negligence or carelessness. This is the bulk of your insurance coverage because medical costs can be extensive. This also includes any passengers in your vehicle and the other vehicles.

Note that the state only requires minimums for each type of insurance to comply. While you are not required to carry more than the state minimum, doing so could be highly beneficial.

To be compliant, Illinois requires that you purchase:

• $20,000 for property insurance per accident
• $25,000 for liability insurance for the injury or death of one individual
• $50,000 for liability coverage for injuries and fatalities per accident

Your auto insurance broker should know the state minimums and ensure that you purchase the right policies and amounts to meet the minimum requirements.

Carry Proof of Insurance

The state also requires that you carry proof of insurance with you always. Purchasing the minimums is only half the requirement, and law enforcement can ticket you for not having proof of coverage in the vehicle. While your insurance company may have a mobile app so that you can show proof of insurance regardless of where you are, you should still carry a hard copy proving coverage inside your vehicle’s glove box.

The Insurance Not Required, but Necessary

Here is where most motorists fall short. They carry the minimums required by the state, but then they neglect the optional insurance that provides them with better security. These voluntary car insurance policies include:

• Collision
• Comprehensive
• Towing
• Medical Payments
• Uninsured/Underinsured Motorist Coverage

What Happens if You are Uninsured or Underinsured?

The state does penalize motorists for not having enough insurance coverage. Driving without the state minimum insurance involves a fine, and your driver’s license may be suspended.

In addition to the criminal penalties, you could face harsh civil penalties, such as a judgment being filed against you for the injuries and damages caused by your negligence.

So, What Insurance Do You Need?

You know the minimums, and you know some of the optional coverages available. But, how do you determine what insurance policies you need? More so, how do you know the value you should put into each policy?

Before you can put a number on each policy, you need to know what each one of these does, and the terms associated with them. More so, you must understand how these policies protect you in the event you need to file a personal injury claim later.

Insurance Terms to Know

• Deductible – The deductible is the amount you pay out of pocket before insurance picks up the rest. Deductibles range from $0 to over $5,000. Only select a deductible you can pay, which means having that money aside in a savings account. If you select a $5,000 deductible, you pay less per month, but your insurance will not cover damages until they exceed $5,000. Note that most policies have two deductibles: one for comprehensive, one for collision.
• Coverage Limits – Coverage limits are the maximum amount your insurance will pay for your claim. If you exceed policy limits, you are personally responsible for the remainder. Therefore, if you were at-fault for an accident that cost $200,000 for the claim, but your max coverage is $150,000, you would be personally liable for the remaining $50,000.
• No-Fault and At Fault – Some states have no-fault policies, which means each party’s insurance company pays for their portion of damages. Illinois is not a no-fault state. Instead, Illinois uses the fault policy system. The fault system determines which party caused the accident, and who is legally liable for any damages from that crash. Once fault is established, the at-fault party’s insurer pays.

Basic Insurance Coverage – and How It Works

Your primary insurance policies protect you from a lot – including times when you cause an accident. These are the coverages required by the state, which include liability and collision coverage.

When you look at your coverage, you should see them broken down into thirds – these represent the levels of coverage you have purchased. If you bought the minimums, your coverage would look like $25,000/$50,000/$20,000 or 25/50/20.

Financial experts recommend a much higher amount if you are a middle-income earner with assets (such as a home), and a decent savings account. In fact, they recommend that you carry 100/300/100. The cost of the higher coverage will not be an extraordinary monthly burden either. For most people, the price is under $100 per year to add these high coverage limits.

If you own an expensive home, financial experts recommend you up those values to 250/500/100, especially if you are a high-income earner. Also, having a supplemental umbrella policy for at least $1 million could protect your home in the event you are sued for injuries.

Do You Need Uninsured Motorist Coverage?

If you have health insurance and collision coverage, you may get away without uninsured motorist coverage. However, it is a good move financially to have this coverage, because it will minimize the out-of-pocket costs you experience if you are involved in an accident with an uninsured or underinsured driver.

Uninsured motorist bodily injury coverage handles the medical costs of your catastrophic injuries. The state does require that insurance companies offer this coverage, but you are not required to purchase it. Uninsured motorist coverage is relatively affordable, and barely adds $100 per year to the average driver’s policy.

Do You Need Comprehensive and Collision Coverage?

Comprehensive insurance pays for the damage to your vehicle from a severe event which is not accident-related, such as weather or fire. Collision pays for the damage to your car specific to an accident.

While these are costly portions of your policy, they are critical if you have a vehicle that is less than ten years old, because your vehicle could be worth more than the repairs needed on it. Also, if you have a loan on that car, the lender will require a specific limits to ensure the vehicle is always covered. The coverage amounts depend on the lender, but your lender will verify coverage before approving you for the loan.

Comprehensive and collision require that you select a deductible. The deductible is your out-of-pocket portion. As discussed previously, choose an amount you could quickly pay in the event you must file an insurance claim.

Do You Need Medical Payments or Personal Injury Protection (PIP)?

No fault states do require PIP coverage, but Illinois does not require PIP insurance because it is not a no-fault injury state.

Medical payments are a different level of coverage. While not required by the state, it is imperative that you add medical payments to your insurance policy, especially if you do not have health insurance or you have inadequate health insurance. If the other driver’s policy is minimal, you will rely on your automobile and health insurance to pay for your injuries – which could quickly reach policy maximums.

Personal injury protection and medical payments do add a significant portion to your annual costs for automobile insurance, but just one accident can prove how valuable this insurance can be.

Bottom Line: Insurance Only Covers So Much

The most important item to remember when shopping for insurance is that where your coverage falls short, you pick up the tab personally. Therefore, if you do not have adequate insurance, you will use your finances and assets to pay any remaining portion.

You can avoid this liability by having quality insurance coverage on all vehicles that you own.

Injured in a Motor Vehicle Accident? Contact an Injury Advocate

Understanding the inner workings of insurance policies is complicated. That is why after an injury you need an attorney. An attorney can review your policy as well as the at-fault driver’s policy so that you can get the medical payments, auto repairs, and compensation you need to recover.

Speak with an attorney from Malman Law today by calling 888-307-7068, or request more information online.