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Losing Everything Due to Inadequate Auto Liability Coverage

Updated: Nov 12

All states set minimum coverage levels for drivers, but if you are involved in a serious accident, minimal coverage may not get you off the hook for the full extent of damages.


Each state’s goal is to make the required insurance affordable, but in many cases the established minimum coverage is not adequate to cover the liability costs if you are found to be at fault in a costly accident. And if your policy’s limits are not enough to cover the costs, you would be liable for the rest. So what are your options?


1. General Liability Insurance

2. Full Coverage Insurance

3. Uninsured Motorists



GENERAL LIABILITY:

Liability insurance is a part of the general insurance system of risk transference, designed to offer specific protection against third party claims, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract.



FULL COVERAGE INSURANCE:


FULL COVERAGE: COMPREHENSIVE & COLLISION

Comprehensive & Collision Insurance covers most of


To most drivers, “full coverage” means you have bought not only liability insurance – which is mandatory virtually everywhere and pays for the damage you inflict on other people and property – but comprehensive and collision, too.

Ideally, full coverage means you have insurance in the types and amounts that are appropriate for your income, assets and risk profile. The point of all types of car insurance is to keep you from being financially ruined by an accident or incident.

Of course, you can buy a policy with every conceivable option:

  • The highest available liability limits (usually $250,000 per person bodily injury, $500,000 per accident, $100,000 property damage)

  • The lowest possible deductible on collision and comprehensive coverage. At some companies, it's $0, but $100 and $250 are common.

  • Uninsured motorist coverage

  • Uninsured/underinsured motorist bodily injury coverage with limits matching your liability coverage

  • Uninsured motorist property damage (not available in all states)

  • All available medical coverages in the highest amounts possible (personal injury protection in no-fault states and medical payments coverage in most others)

  • Rental reimbursement coverage

  • Towing and labor

  • Preferred-customer add-ons such as new car replacement programs or vanishing deductibles

In reality, there is no policy that will cover you and your car in every situation, just most of them.


What does full coverage car insurance consist of?

A typical full coverage policy (liability, comprehensive and collision, uninsured motorist and medical coverage) should cover:

  • The damage you do to others, up to your liability limits.

  • Your car, up to its fair market value, minus your deductible, if you are at fault or the other driver does not have insurance or if it is destroyed by a natural disaster or stolen.

  • Your injuries and those of your passengers, if you are at fault, up to the amount of your medical coverage.

  • Your injuries and yours of your passengers, if you are hit by an uninsured motorist, up to the limits of your uninsured motorist policy.

Typical full coverage car insurance won't pay for:

  • Racing or other speed contests

  • Off-road use

  • Use in a car-sharing program

  • Catastrophes such as war or nuclear contamination

  • Destruction or confiscation by government or civil authorities

  • Using your vehicle for livery or delivery purposes; business use

  • Intentional damage

Typical comprehensive and collision policies won’t cover:

  • Freezing

  • Wear and tear

  • Mechanical breakdown (often an optional coverage)

  • Tire damage

  • Items stolen from the car (those may be covered by your homeowners or renters policy, if you have one)

  • A rental car while your own is being repaired (an optional coverage)

  • Electronics that aren’t permanently attached

  • Custom parts and equipment (some small amount may be specified in the policy, but you can usually add a rider for higher amounts)

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