As a 17 year old driving to school, I had an unlucky accident with another driver when a school bus suddenly threw its stop sign out and traffic came to a halt.
My car went right into the bumper of another. It wasn’t much of an accident; I had hit the brakes before hitting the rear of the car in front of me. I couldn’t have been going much faster than 20 miles an hour. This accident practically defined the term “fender bender.”
But the cost was exorbitant, really. It wasn’t until I changed insurance companies years later that I found out the accident totaled to nearly $30,000 in damages – a few thousand dollars in property damage and thousands upon thousands of dollars in disability and health care costs.
Car Insurance Customers are Held Captive
New Hampshire is the only state in which drivers are not legally required to own car insurance. Every other state requires it. And even then, the simple economics of insurance and the legal system means that you have to have more insurance than you need.
Insurance companies rarely fight big expenditures. Never did my insurance company ever question $30,000 in disability and health care costs. Never was there any question as to whether the amounts were justified given the slow speed of the accident. In the eyes of the insurance company, it’s much easier – and more cost-effective – to simply pay out insurance benefits when someone makes a claim.
So drivers need to have a lot of insurance. State minimum coverage – which can be as low as $10,000 in bodily injury protection in some states – won’t give you much protection in the event you get in an accident. If insurance companies have only $10,000 in liability, they have no real incentive to provide you with real financial insulation. They’ll mail a few checks, and leave you with the remainder of the costs.
Be Smart about Car Insurance
Most people like to think about their cars and not their other assets when making a decision about how much insurance to purchase. While car insurance does come in handy for property damage, the most unpredictable cost is that of bodily injury.
Here’s the good news when it comes to purchasing more bodily injury coverage:
- It’s cheap – Relative to how much protection a large bodily injury limit gives you, the monthly or annual premium increase is tiny. I can add $100,000 at a time to my bodily injury limits per person, per accident with a modest $7 increase in my monthly insurance premium. Those with better driving records would probably find more bodily injury protection less expensive.
- Public information is everywhere – Do a quick Google search of your current car insurance company to see how it responds to claims. Companies that respond and pay promptly to claims are great, unless they’re doing no service to their customers. Many less expensive insurance companies that sell smaller policies have a tendency to mail checks before any real investigation. See where that cut off points seems to be for cases that are or are not worth fighting or investigating, and make sure you carry more insurance than that!
I learned a valuable life lesson from my accident, and I’m just happy I had enough coverage when it happened. Had I had only the state minimum, I would have owed thousands of dollars in liability for the costs which exceeded my insurance limits.
I’ll always carry a lot of bodily injury protection. For a few dollars per month, the peace of mind that comes from a $100,000/$300,000 limit is more than worth the price you pay.