One of the most important components of your auto insurance is liability, though it often gets less attention than collision and other coverages. While liability insurance is required to have your vehicle on the road, many people only carry the minimum costs and fail to realize that this may leave them lacking the coverage they need in the event they are involved in a major accident. Whether it is due to a lack of understanding of coverages or poor guidance, often policies don’t provide the coverage that is needed to protect drivers adequately.
The Common Components of Liability Insurance
The two main components of the liability portion of your insurance include bodily injury (BI) and property damage (PD). Both of these insurance components work together to protect you from coming out of pocket for expenses if you are involved in a vehicle accident and determined to be at fault. Bodily injury coverage pays the costs of medical and other expenses to the driver in the other vehicle that they may have experienced as a result of the accident. Property damage will cover their vehicle or other property that was caused by the accident you were at fault for.
What Is UI and UIM?
Uninsured motorists (UI), underinsurance motorists (UIM), and underinsurance motorists property damage (UMPD) are all coverages to help pay for medical and property damage suffered in the event you are involved in an accident with someone who is uninsured or underinsured. This type of coverage is critical so that your insurance will provide compensation for injury to passengers and property if the other driver has no insurance or not enough insurance to cover the costs. Many drivers are dismissive of this type of coverage, often believing the situation will not happen to them. But the cold hard truth is that 14.3% of drivers in Wisconsin are uninsured, and an even larger percentage lack sufficient insurance.
Effects of the Recent Economic Uncertainty
With the recent COVID-19 pandemic sweeping the country, insurance premiums and coverages are being affected now and likely in the future. To offset the financial hardship that many families are enduring, most insurance companies are providing premium refunds as a response to fewer accidents from having fewer vehicles on the road. In addition to a reduction in premium rates, most companies are allowing policyholders to defer their payments, allowing to pay their balance at a later date when the crisis comes to an end. So how can this affect insurance coverage? Eventually, the total of these premiums will be due. With a slow resurgence in the economy expected, it is believed that many people will be unable to pay these large accumulated bills when the deferment period is over. The result will likely be a significant increase in uninsured motorists taking to the road.
How to Understand Your Liability Coverage Breakdown
Another reason that policyholders may fail to have the appropriate coverages is because they may not understand the breakdown of each type of coverage. The most common type of breakdown is split limits. These will show on your policy as 50/100, 100/300, or other similar number combinations. The first number is the dollar amount of coverage per person in the thousand, and the second number is the total cost in the thousands for each accident. Coverage could also be represented using a combined single limit such as 250 or 500. This means that the coverage per person and per accident is the same, and the number represents the total coverage in the thousands.
Since an accident can cost tens to hundreds of thousands of dollars in repairs and medical expenses, you must have the amount of coverage you need to avoid having to come out of pocket. Traditionally the minimum required levels are insufficient and can leave you will too little coverage to provide you with the proper protection. Unsure of how much coverage will provide you with the protection that you need? Contact an experienced independent insurance agent to walk you through the process. Pagel & Associates Insurance Agency understands the ins and outs of policy limits and can help you find the solution to your insurance needs. Contact them today to schedule an appointment.