The High Cost of Low Coverage

The High Cost of Low Coverage
February 5, 2021 Pearl Insurance
The High Cost of Low Coverage

The High Cost of Low Coverage

Money is tight for many of us with limited relief coming anytime soon. The thought of saving a bit wherever you can is very tempting—but choose wisely.

When you consider an auto insurance quote, your first instinct might be to request the lowest rate. If you’re not in the insurance business, you may not realize how dangerous and costly that choice can be.

You might also be tempted to lower your coverage to the state minimum limits of liability—the minimum amount of car insurance your state requires by law. It’s crucial to consider your liability limits and to opt for the highest that you can afford even if that means you’re paying a higher rate.

Here’s why.

The Real World

Sometimes, a practical example is a good way to get a point across. Here’s a typical scenario that can happen to anyone.

Let’s say you secure the minimum amount of $10,000 of property damage liability in the state of New York for your Toyota Camry. You’re driving one wintery night, slip on black ice, and collide with a Tesla Model S. The Tesla is totaled. Your insurance policy will only pay a maximum of $10,000 for the property damage you’re liable for. “Wait, that’s a $90,000 Tesla,” you may think. “What about the other $80,000?”

That’s a question you never want to ask yourself. In this case, you would be on the hook for it. Chances are, you’ll be tapping your savings or retirement account to cover a balance like that. In some cases of non-payment, your wages could be garnished, or your home or other assets could be in jeopardy.

Umbrella Protection

So if I increase my coverage, I’ll be good to go then? Not exactly.

Say during the collision, the driver and passenger of the Tesla suffer back and neck injuries that require weeks in the hospital, rehab, and a huge medical bill. You would be liable for all of it. An umbrella liability policy can put your mind at ease and protect you in these situations. An umbrella policy can provide coverage for injuries and property damage which may be in excess of your primary policy limits or cover losses not included under your policy.

The average umbrella premium is $225 annually and is worth every cent. Most insurance companies will even allow you a maximum of $5,000,000 in coverage for an umbrella policy.

Be Prepared

The chances of being sued are on the rise. The insurance industry is tracking an increase in lawsuits across all sectors due to the pandemic. Beyond securing adequate coverage, it’s also a good idea to practice safe driving habits. Prevention is the best way to decrease the risk of a claim. Read our post “Top Five Winter Safety Tips for Your Car” to ensure your vehicle is ready for winter roads.

You can never predict an accident—a motorcyclist rounding a corner the second you pull out from a stop sign or a pedestrian dressed in dark colors walking along the roadway on a snowy night—but you can be prepared.

Review and compare your auto insurance with a Pearl agent or get a quote on an umbrella policy. Visit today!

James Blundell, Sales Manager, AAI, CPIA
Pearl Insurance