pocket Financial planner » IX. Insurance Planning

Part 4: Comprehensive Physical Damage Coverage

Boston — Thu, 26 Jun 2008 00:43:52 +0000

Sometimes referred to as collision coverage, comprehensive physical damage coverage is coverage that pays for damages from any collision, regardless of who is at fault. If the other driver is at fault and has liability coverage, your insurance company should be able to recover losses from the other driver’s insurance company. If the accident does not involve a collision with another vehicle, comprehensive physical damage coverage covers any physical damage to your car. (note: this coverage is for your car and not personal physical injuries.)

One of the easiest and quickest ways to reduce your premium is to not have comprehensive coverage. This is an optional coverage that is not required by law. However, it is also one of the best ways to protect yourself from any serious damage to your car (your fault or not).

One of the best ways to decided whether or not comprehensive coverage is right for you is to see how much your car would cost to replace or repair. A quick search on Kelly Blue Book or N.A.D.A. will give you a current value for your car. If your car value drops below $2,000 it might not be worth the extra money to carry collision coverage; it may be more cost-effective for you to pay repair costs out of your own pocket if the car is in a collision.

Automobile Insurance Explained
Part 1: Liability coverage
Part 2: Medical payment
Part 3: Uninsured/underinsured motorist coverage
Part 4: Comprehensive physical damage coverage (see above)

Part 3: Uninsured/Underinsured Motorist Coverage

Boston — Tue, 24 Jun 2008 02:54:23 +0000

Uninsured or underinsured motorist coverage is similar to liability coverage. It covers your costs if you are injured by an uninsured motorist or if you are injured in a hit-and-run accident. It also covers your costs if the other driver’s insurance is insufficient to pay for your expenses (in other words, if the other driver is underinsured).

The reason this coverage is different from liability coverage is that the other driver must be at fault for you to collect on this coverage. It is recommended that you keep your uninsured/underinsured insurance coverage the same level as your liability coverage.

Automobile Insurance Explained
Part 1: Liability coverage
Part 2: Medical payment
Part 3: Uninsured/underinsured motorist coverage (see above)
Part 4: Comprehensive physical damage coverage

Part 2: Medical Payment Coverage

Boston — Sat, 21 Jun 2008 05:01:39 +0000

The second part of automobile insurance coverage is medical payment coverage. Medical payment coverage pays for all accident-related medical costs and funeral expenses incurred by you or your family members within three years of an accident. Medical payment coverage also covers policyholders and their family members when in others’ vehicles, or when policyholders and their family members are on foot and hit by a car. The recommended minimum medical payment coverage is $50,000.

Medical payment coverage does not cover all medical expenses, however. For example, it does not cover your medical expenses if you are injured by a vehicle that is not designed for public streets, such as an unlicensed three- or four-wheel all-terrain vehicle. Be sure you know what types of injuries are excluded from your policy.

Automobile Insurance Explained
Part 1: Liability coverage
Part 2: Medical payment (see above)
Part 3: Uninsured/underinsured motorist coverage
Part 4: Comprehensive physical damage coverage

Part 1: Liability Coverage

Boston — Fri, 20 Jun 2008 00:29:33 +0000

Liability coverage pays for losses related to bodily injury, property damage, lawsuits, and defense costs. Bodily injury coverage protects against expenses related to deaths or injuries resulting from an accident. Property damage coverage protects against costs for damage to the car or cars involved in an accident, as well as damages to other property (such as fences or fire hydrants). Lawsuit coverage covers losses related to any lawsuit resulting from an accident.

Combined-Limit Coverage
Liability coverage may be listed on your policy as a combined-limit or as a split-limit, depending on the type of insurance you have. Combined-limit insurance lists one maximum amount that the insurance company will pay to cover all types of liabilities in an accident. For example, 300/50. This means the insurance policy will cover up to $300,000 worth of injuries in an accident with no limitations on a per individual basis (see below). However, most policies are written as split-limit policies.

Split-Limit Coverage
Split-limit insurance lists the maximum amount that the insurance company will pay for each of the specific types of liability. If you have a 100/300/50 split-limit insurance policy, it means your limits are $100,000 per person for bodily injury liability coverage, $300,000 per accident for bodily injury liability coverage, and $50,000 per accident for property damage coverage. These dollar amounts are the maximum amounts your insurance company will pay per person or per accident. Should the costs of the accident exceed these limits, you will be responsible for paying the difference.

Example:
If you were to get into an accident the most your insurance policy would cover for the entire accident would be $300,000. However, the max they will pay per person is only $100,000. If the accident involved eight people and all eight people each had $50,000 worth of injuries the insurance policy would only cover the first six people. You would be personally liable for the remaining two. If the accident only involved two people but one of the persons injuries resulted in $150,000 of injuries the insurance policy would only cover the first $100,000 and you would personally liable for the remaining $50,000. In either case the most the insurance policy would pay for property damage is $50,000 total (including all parties involved).

The recommended split-limit minimum liability coverage limits are 100,000 per person and 300,000 per accident with 50,000 for property damage. The combined-limit recommend liability coverage limits are 300,000 per accident with 50,000 property damage.

Automobile Insurance Explained
Part 1: Liability coverage (see above)
Part 2: Medical payment
Part 3: Uninsured/underinsured motorist coverage
Part 4: Comprehensive physical damage coverage

Automobile Insurance Explained

Boston — Thu, 19 Jun 2008 05:15:44 +0000

I’m sure we’ve all done. We come home from work, open the mailbox and see a letter from our car insurance company. The first thought that usually comes to mind is “oh great, have they increased my premiums?” Although this is very important when it comes to financial planning I would like to suggest that it is not the first thing we should be looking for when it comes to auto insurance.

Is My Coverage Sufficient?
I would suggest the first and most important thing we look for is whether or not we have sufficient coverage for current situation. When most people take out a car insurance policy the only thing they are worried about is getting the lowest rate possible. I too would agree that the ultimate cost of your policy is very important, but I also believe this to be secondary to the amount of coverage on the policy. As you know, to legally drive your car, you are required by law to carry a minimum level of coverage. However, most experts agree that the minimum coverage required by law is insufficient.

What Do the Numbers Mean?
After understanding the importance of sufficient coverage, we next must understand what the coverage numbers mean. There are basically four different components to automobile insurance that must be understood. (click on each part for a detailed explanation)

Automobile Insurance Explained (see above)
Part 1: Liability coverage
Part 2: Medical payment
Part 3: Uninsured/underinsured motorist coverage
Part 4: Comprehensive physical damage coverage

With a sound understanding of the different components of automobile insurance coverage you are now better able to know if you really are getting a “good deal” with your current policy.