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Full Coverage vs Liability Only Car Insurance

Full Coverage vs Liability Only Car Insurance

Some people comparing car insurance cost will request a liability only policy while others request a quote for full coverage car insurance. Most people have a general idea what they are requesting when asking for one or the other, but they may not understand this can be written several ways. Let’s contrast the two and look at how both can be written. In simple terms, full coverage car insurance means the policyholder’s car or truck will be covered if in an accident while liability coverage will pay to fix the car and provide some level of medical care for the person the policyholder hits. The sections of most car insurance policies include: Bodily Injury Property Damage (BIPD): this is the liability piece which protects the vehicle owner if they are at fault in an accident. Uninsured / Underinsured Motorist coverage (UM/UIM): optional coverage to protect the vehicle owner if they’re hit by someone with no or not enough car insurance. Comprehensive deductible: covers damage to vehicle caused by hail, flood, falling object, hitting an animal, etc. Collision deductible: covers repairs to owner’s vehicle caused by an accident regardless of who is at fault. Towing & Roadside Assistance: optional coverage for a tow, unlocking a door, help with changing a tire, etc. Rental Car Reimbursement: provides a rental car if vehicle is involved in an accident. Liability Coverage: Pure liability only coverage means the policyholder only has bodily injury property damage coverage. There’s no coverage for UM/UIM, towing, roadside assistance, nor rental car reimbursement. In addition, there’s no comprehensive or collision coverage / deductible either. This is the cheapest form of car insurance. Liability coverage, may also include adding one or more options including UM/UIM, and possibly even towing and roadside assistance. They may even add the comprehensive deductible, which most car insurance companies will require if the policyholder wants towing and roadside assistance. The advantage of carrying UM/UIM is it provides medical coverage for the policyholder and their passengers and potentially repairs to the vehicle if involved in a not at fault accident. The cost to add these items is very little and may make sense depending on one’s budget and the vehicle’s value. The only items not covered in this approach are repairs to the policyholder’s vehicle and rental car reimbursement. Full Coverage: At a minimum, full coverage simply means the policyholder has BIPD and the collision deductible. This provides coverage whether involved in an at fault or not at fault accident. Additional options may be added as desired including UM/UIM, comprehensive, towing and roadside assistance, and rental car reimbursement, however, one doesn’t have to carry all of them for it to be...

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Personal Liability Insurance and Umbrella Policies

Personal Liability Insurance and Umbrella Policies

I was talking with a prospective client the other day who’s asked us to review her home and car insurance. She’s been with the same carrier for over 10 years and wants a second opinion on whether she’s paying more for her insurance than she should. After asking questions about her home, car, and driving habits, I asked her if her annual income was more than $125,000. That, combined with a few details she shared indicated she should probably consider an umbrella policy. Let’s review what one is, the additional coverage it provides, and who should consider such a policy. Both home and car insurance policies contain liability insurance for the home or car owner. Personal liability coverage on a home or renter’s policy is designed to protect the policyholder if someone comes onto their property or in the home, is somehow hurt, and sues the policyholder for negligence. Personal liability coverage on a car insurance policy is what pays if the policyholder is involved in an accident where they are at fault. An umbrella policy is a separate liability policy which provides extra liability coverage in addition to what the auto and home policies provide. Umbrella policies provide coverage in amounts ranging from $1,000,000 to $5,000,000. When coupled with the underlying limits on the home or auto policies, an umbrella provides significantly more protection. For instance, Take a home policy with $500,000 in personal liability and add to that a $1,000,000 umbrella, then the total liability coverage becomes $1,500,000 If the car policy has liability limits of 250/500/100 limits and you add a $1,000,000 umbrella the liability limits become $1,250,000/$1,500,000/$1,100,000 Umbrella policies also provide protection against libel and slander; two claims no home policy protects against. Umbrellas provide a higher firewall between the policy holder and a potential lawsuit for negligence, as no insurance company wants to write a check for over $1,000,000. One way to look at umbrella policies, is that for certain people, it’s like having an attorney on retainer. I usually recommend an umbrella policy for people who meet one or more of the following criteria; Homes with a value of $300,000 or more, have a pool or trampoline, or located in nicer parts of town Combined household income of $125,000 or more Certain career classifications – doctor, lawyer, engineer, architect, business owner, athlete, entertainer, etc. Own rental property Have inheritance or financial assets in non-protected accounts An umbrella policy usually costs between $180 and $350 a year for a couple with one home and two cars with no tickets or accidents. Rates will increase somewhat if there is driving activity (tickets & accidents), a teen driver, multiple homes, motorcycles,...

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