How Much Automobile Insurance Do I Really Need?

We’re all likely familiar now with the Allstate commercials featuring the character “Mayhem,” who inflicts some form of bizarre disaster upon a driver and then warns that “your cut-rate car insurance” may not cover the damage. He then tells you to get your insurance through Allstate “to be better protected from Mayhem, like me.” At our firm, we have seen some of these “cut-rate” insurance companies out there that really do treat their insureds poorly when a crash happens, so it’s a good idea to purchase your auto insurance coverage through a reputable and recognizable insurance company. Once we’ve chosen a good company, how much insurance do we need?

Hopefully, anyone reading this newsletter is covered by a policy of auto insurance that provides coverage in the event you cause an accident or injury. Liability insurance provides coverage when you, or someone driving your car with your permission, cause property damage or bodily injury to someone. In Tennessee, most of these policies start at the minimal coverage amount of $25,000/$50,000, and then increase to $50,000/$100,000, then $100,000/$300,000, $250,000/$500,000 and beyond. As your coverage increases, so does your premium. The first number shows how much the auto insurer will pay for an injury to any “one person.” The second number reflects how much the auto insurer will pay for any “one accident.” For example, if you have the minimum limits of 25/50, the auto insurance company will pay up to $25,000 for any one person injured. If more than one person is injured in the crash, the policy will pay up to $50,000 total, but still never more than $25,000 for any one person. Ask your insurance company to send you your “Declarations Page” if you don’t know how much coverage you have purchased.

If the person injured in a crash has to be admitted into the hospital, requires radiological studies like x-rays, CTs, or MRIs, or has broken bones or other serious injuries, their medical expenses could easily surpass $25,000 before they are ever discharged. That could leave you personally responsible for any damages in excess of $25,000. For this reason, most experts will advise that you should carry at least $100,000/$300,000 auto liability coverage, and more if your budget allows. Keep in mind that many auto insurers offer umbrella policies that can provide additional liability coverage in the event that your underlying coverage is not enough, but there are often conditions to qualify. You may want to speak with your auto insurance representative about an umbrella policy as those policies can often be purchased for a modest increase in your premium.

But what happens if you aren’t at fault for a car crash? If someone hits you, doesn’t their auto insurance policy pay? Yes, if they have insurance, but only up to the limits of insurance the at-fault vehicle owner has purchased. That’s why everyone should carry Uninsured/Underinsured (UM/UIM) auto insurance. This insurance provides you additional insurance coverage over and above the policy limits of the at-fault party. However, your UM/UIM policy will provide additional coverage only to the extent your policy limit is greater than that of the at-fault party. For example, let’s say you’ve purchased $50,000 in UM/UIM coverage. Someone hits you from behind, and you are injured. The at-fault party offers his minimum limits of $25,000. If you can prove your damages are more than $25,000, then your auto policy may pay up to an additional $25,000 for a total of $50,000.

Often, there is a disagreement between you and the auto insurance companies involved as to how much you should be entitled to as a result of a car crash. In that event, you may have to take your case to trial in order to have a jury decide how much your claim is worth.

Automobile insurance can be complicated. There is a lot more to know about how auto insurance works following an auto crash that what’s included here, but the takeaway is that it’s a good idea to purchase as much auto insurance as you can afford. You truly will be “better prepared for Mayhem.”

We’ll be happy to speak with you about your auto insurance and how it might apply in the event of a car crash. Stay safe out there!