Why is Liability Insurance Coverage Not Enough?
Everybody one buys car insurance, but I find very few people actually know what they are buying. I am not selling insurance but I would like to share some tools so that people know what they are buying and they know what kind of questions to ask. In this post I can summarize this simply for you.
There are a number of different types of coverage for your family for automobiles. The three most important types are liability, uninsured and underinsured.
Liability is what you need when you are at fault. Say you run a red light and hurt someone else this pays the other driver’s bills.
Underinsured we call UM. This pays your bills when the other guy runs a red light, but is uninsured meaning they have no insurance.
Uninsured we call UIM. This pays your bills with the other guy runs a red light, has insurance, but doesn’t have coverage to cover the extent of your injuries.
The important thing is if you have 100% of your risk in needing any of these three coverages you can look at it like a bar graph. You are the good driver; you are not going to run the red light so there is problely only a 10% chance that you need the liability coverage. The other 90% is the other unsafe driver that hurts you or your family. About a third of those are uninsured drivers which is about 30% of your risk. The other two-thirds or 60% have insurance but they are underinsured.
Types of Coverage and Your Risk in Needing Each
Your Insurance Declaration Page
Now when you look at you insurance policy the first page is called the declaration page. It declares the coverage that you have. It is like a menu in a restaurant, down the left side are the items and down the right side are the prices. Most people only look at the right side and you need to look at both. Liability is the most expensive , uninsured is the next cheapest, and underinsured is the cheapest.
For examples if your liability costs you $300, your uninsured costs you $75, and your underinsured costs you $35 you have 90% of your risk costing you less than the 10% of risk attributed to liability. While its very good and socially responsible to have great liability coverage in case you make a mistake and hurt somebody, if you are paying big bucks to pay someone else’s bills on a low percentage that its going to happen you need to make sure you are buying uninsured and underinsured at the same amounts because together they provide 90% of your total risk and insurance needs.
The example on the right showcases a policy where the UIM and UM match the same coverage totals as the liability. (Please note in this example we are making no recommendations about this being the correct coverage amounts for you and your family.)
Protect You and Your Family
By taking the simple steps to make sure you have at least the same policy amounts as your liability coverage for underinsured and uninsured you will be covered for 90% of the risk you and your family face on Missouri’s roadways. If you have more questions about your insurance policy coverage please contact our office.