We've written before about the importance of carrying adequate auto insurance coverage to protect yourself and your loved ones. Let's recap really quickly the different contexts in which we've discussed the adequacy of important coverages you will likely need:
- What should you ask your insurance agent?
- Understanding your auto insurance
- Coverages as a pedestrian
- Motorcycle coverages
- Safe driver insurance initiatives
- Auto insurance rates for low income families; and, most recently,
- Why drivers should be covered in general
Here, our goal is to not only reiterate why the insurance coverages we discuss so often are important, but also to illustrate that those critical coverages are more affordable than you might think.
There are a lot of drivers on the roads who carry no insurance at all, or who only carry the state-required minimums. If one of those drivers causes you or a loved one injury, all that is going to be available from them for fair compensation is the limits of their policy. In a catastrophic case you could get a judgment in court against the driver for millions of dollars – but you aren't going to see a dime of it, except in the rarest of circumstances, beyond the insurance policy limits they carry. As you may have surmised, there are a lot of cases where the minimum limits just aren't going to go very far in covering your medical bills and lost wages, to say nothing of fair compensation for the non-economic damages (pain, loss of quality of life, inconvenience, activity limitations, etc.).
So, since you can't rely on “the other guy” (or gal) – it is wise if at all possible to protect yourself. That is where having good uninsured/underinsured motorist coverage (UIM) through your own auto insurance policy comes in to play. You simply don't know before an auto collision happens how bad things are going to be, so some UIM is better than none, and higher UIM limits are even better. I always advise my clients and friends to get however much UIM coverage they can reasonably afford. One of the reasons I do so is that bumping the coverage limits up significantly is usually fairly affordable, relative especially to what you get for the cost paid.
I'll use myself as an example. My wife and I have pretty good coverage, because I've seen too much in this business to want to risk leaving our family exposed. We have Bodily Injury/Property Damage liability coverage (covering us if we cause someone or something damage); Personal Injury Protection (also known as “PIP” – covering our medical bills if we get in an accident, no matter who is at fault); UIM Bodily Injury coverage (covering the liability of another driver who causes us bodily harm but doesn't have enough insurance); and, UIM Property Damage (covering the liability of another driver who causes damage to our vehicle or other property but doesn't have enough insurance). As to each type of insurance, we obtained quotes for higher than minimum policy limits from our insurance agent, and learned that buying higher limits didn't really increase the base cost for the auto insurance coverage too much.
Even if it is necessary to pay a healthy premium for the higher than minimum policy limits under each separate type of coverage, if you think about it you will realize that it is worth it. Actually, in the case of a significant injury even $100,000 per person/$300,000 per accident Liability and UIM coverage limits may be woefully inadequate. Because of this, we opted to also purchase an “umbrella” policy. The umbrella policy provides extra coverage if we accidentally harm someone, and because it has a UIM endorsement on it, it also would provide the same amount of extra coverage to us if we were to be hurt by an underinsured driver. Insurers typically won't sell umbrella policies unless you have already purchased higher limit coverages – so you can't buy minimum policy limits and then buy an umbrella to float over the top of it. But if you have a higher level of coverage, an umbrella should be available. With the insurer we use, the ability to purchase the umbrella with the UIM coverage requires us to carry at least $500,000 underlying liability and UIM limits. A homeowner's liability-only umbrella from the same company requires you to carry $300,000 liability limits.
But going the next step is really where you see bang for your buck. Essentially tripling our coverage (from $500,000 limits to $1.5 million), cost us only about $250 per year extra. About $90 of that total is for the extra UIM coverage, and the rest, about $160, buys us the extra auto liability and homeowner's liability insurance.
Pricing between companies may vary, and other factors (such as how many and what type of cars, how many drivers, driving history, etc.) will surely influence what specific price may be quoted to you. We get some discount on ours because we have auto, homeowners, and umbrella “bundled” (all through the same company) – I'm guessing many of you are in the same boat. But the overall message, backed up by comparing insurance expense info with friends and colleagues, and sampling some online quotes through insurer websites, is that adding significant extra coverage is often very affordable. I can say, based on my years of experience in this field, that the difference in that amount of coverage available can be tremendously helpful in a time of confusion and need, such as after a major injury or death. Hopefully you will never have to access it, but if you do, it will be undoubtedly some of the most cost-effective protection money can buy.
One final suggestion – if and when you do start to shop for an umbrella coverage, double check –actually maybe even triple check – that the policy you are being quoted and considering purchasing offers not only a floating layer of $1,000,000 or more of Liability coverage, but that it is also going to provide you with a floating layer of $1,000,000 or more of UIM coverage. There are some insurance carriers that will offer both types, and some that won't. If I were you I would keep shopping until I found one that did offer both types, and make sure that the umbrella coverage I was buying for sure applies to UIM as well as Liability coverage.