Coverage Help| SOS Insurance Services

Coverage Help

There are no hard-and-fast rules about the amount of coverage you should buy. Although your state mandates minimum coverage, many people buy more coverage than the minimum.

Only you can decide what financial protection you and your family need and can afford. At SOS, our #1 goal is to provide you with information so you can make an informed decision.

Here are some guidelines that can help you determine how much coverage you need to protect your assets and future earning power.

Insurance that protects your assets if your negligence injures other people or damage their property:

Bodily Injury Liability Coverage

What this insurance covers:
If you or another driver covered by your policy is involved in an auto accident that injures or kills another person, this coverage pays for claims for which you are legally responsible.

What you should consider:
It is very important to have enough Bodily Injury Liability Coverage! It is possible that the other party (or survivors) will sue you. In the unlikely event that you are found legally liable for the injuries, you will be required to pay a specific dollar amount to the injured person. If your Bodily Injury Liability insurance limit is not as high as the amount the jury or judge awards to the other party, you may need to give up some or all of your existing assets (home, car, savings), and/or some of your future earnings, to satisfy the judgment.

Here are three examples of typical households and the lowest limits of Bodily Injury Liability coverage that we believe each should consider.

Example #1: Homeowner

Your home may be your family's biggest asset. But you may also have savings, a 401(k) plan or other assets.

What is at risk if you don't have enough insurance:
1) The equity in your home, because you could be forced to sell your home to pay the judgment
2) Any other assets
3) Your future earnings

How much Bodily Injury Liability coverage should you consider:
Minimum $100,000/$300,000 ($100,000 per person, $300,000 per accident; the second number covers more than one person injured in the same accident).

Example #2: High net worth individual or family

You own a combination of stocks, bonds, mutual funds, 401(k) plan, and real estate, which may include your home, a second home and/or investment property.

What is at risk if you don't have enough insurance to pay the judgment:
You could be forced to sell part or all of your assets to pay the judgment
Your future earnings

How much Bodily Injury Liability coverage should you consider:
At least $100,000/$300,000. A limit of $250,000/$500,000 may be even more appropriate. You may also wish to consult your accountant if your net worth is considerably higher.

Example #3: Recent college graduate

You own a few assets and have lots of college loans to pay off.

What is at risk if you don't have enough insurance to pay the judgment:
Your future earnings, especially if your job has prospects for steady increases.

How much Bodily Injury Liability coverage should you consider:
Minimum $50,000/$100,000 to start, then increase to $100,000/$300,000 as your income increases and your loans are paid down.

Property Damage Liability Coverage

What this insurance covers:
If you or another driver covered by your policy is involved in an auto accident that damages property other than your own, this coverage pays for claims when you are legally responsible.

This property most often would be another party's auto, perhaps an expensive one. Other examples of property damage include real estate damage (if you lost control and ran off the road) or even the contents of the other party's automobile.

How much Property Damage Liability coverage should you consider:
We suggest that everyone should carry at least $50,000 of Property Damage Liability coverage. Many cars on the road today have a value at least that high. If you would have difficulty paying a higher judgment out of your own pocket, you may wish to consider $100,000 of coverage. Higher limits usually cost just a few dollars extra per year.

Insurance that protects you if you are injured or your property is damaged (no matter who is at fault)

Uninsured/Underinsured Motorists Coverage

What this insurance covers:
If you are in an auto accident caused by the negligence of the other driver, and the other driver has no insurance or not enough insurance, this coverage will pay if you or another driver covered by your policy is injured or killed.

What you should consider:
Rates for Uninsured/Underinsured Motorists Coverage vary widely by geographic area. If the rates are higher in your region, that also means that there is an increased chance that if you are in an accident, the other driver will be uninsured or underinsured. Some reason for higher rates include:

1) Rates are relatively high in areas where a high percentage of drivers do not buy liability insurance.

2) Lower income areas have higher proportion of uninsured cars, or cars with low liability limits, probably because the coverage is expensive relative to low incomes.

3) Most states require motorists to buy liability insurance in order to drive the car on public roads. Some states enforce the laws better than others. Coverage tends to be more expensive in areas where enforcement is weak.

How much coverage should you consider:
We suggest that you consider Uninsured/Underinsured Motorists Liability Coverage equal to your Bodily Injury Liability limits if:

1) You do not have other insurance protection to draw on

2) You want to increase the likelihood that, in the event of a serious accident with a negligent uninsured or underinsured driver, you will be reimbursed at some dollar amount for your pain and suffering, inconvenience, mental anguish and other "intangible" losses.

Other than Collision (Comprehensive)

What this insurance covers:
Damage to your auto for fire, theft, windstorm, vandalism, glass breakage, etc. -- in other words, damage that occurs other than in an accident. The amount of coverage available is equal to the actual value of your auto. You choose a deductible amount that you will pay in the event of this kind of damage.

What you should think about when choosing this coverage and your deductible:
1) How likely is your car to be stolen or vandalized?

2) Is it parked in a safe place at home and at work?

3) Find out the cost savings and then decide if you might prefer to carry a higher deductible, like $500 or $1,000.

4) How likely is your windshield to be cracked or broken? For example, if you already carry a $250 deductible, consider the cost savings of a $500 or $1,000 deductible compared to how likely it is you will need to file a claim.

Collision

What this insurance covers:
This pays for damages to your auto caused by impact with another vehicle or object (tree, telephone pole, building, etc.). The amount of coverage available is equal to the actual value of your auto. You choose a deductible amount that you will pay in the event of this kind of damage.

What you should think about when choosing this coverage and your deductible:
Anyone can have an accident. But if you and every other driver covered by your policy are careful drivers, you may decide that a higher deductible is appropriate, when you compare the premium savings to the likelihood of damage. Keep in mind that if the other driver involved in the accident is mostly at fault, you could get some or all of your deductible back from the other driver's insurance carrier.

If your car is very old and not worth much, you may decide this coverage is not valuable to you, considering the premium cost.