Auto Insurance Limits & Deductibles
The impact of insurance limits and deductibles are fully-realized only at the time of a loss. Shopping policies carefully by asking detailed questions of the insurer prior to purchase can help ensure a policyholder is properly protected when the unexpected occurs. Lowered insurance limits, while saving money in the short-term, can cost policyholders dearly in the long-run. An unexpected deductible expense when short on cash can also cause additional stress for policyholders at the time of an accident.
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Identification
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Automobile limits are offered in terms such as 15/30/10, 25/50/25, 50/100/50, 100/300/100 and 250/500/250. These numbers represent thousands of dollars. The first limit is a per-person liability limit that pays medical expenses for injuries to others sustained during an at-fault accident. The second is an aggregate limit -- the total liability coverage allowed per accident. The third limit represents the amount of property damage paid out for another person's damaged vehicle or property.
Features
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Only comprehensive and collision insurance carry deductibles, which are determined by the policyholder at policy inception -- usually up to $750. Liability insurance pays others up to the policy limits with no deductible expense incurred by the policyholder.
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Benefits
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Liability auto coverage protects other drivers for injuries sustained when the policyholder is found at-fault for an accident. Choosing higher liability limits protects the policyholder from potential lawsuits for additional monies not covered by an automobile insurance policy.
Considerations
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Policyholders should examine the premium savings when opting for higher deductibles against the potential out-of-pocket expense. Those with limited savings and tight monthly budgets, unable to suffer an unexpected deductible expense after an accident or loss are better off choosing a lower deductible.
Significance
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Comprehensive and collision payout limits are based upon the insurance carrier's rating system that determines the value of the car insured. Those with higher-priced vehicles pay a larger monthly expense for the coverage. Most insurance carriers do not determine value for totaled vehicles using standard guides such as Kelly Blue Book or similar rating guides, which can often come as a nasty surprise to policyholders when suffering a loss.
Expert Insight
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Opting for a full-glass endorsement on comprehensive auto coverage waives the normal deductible for cracked windshields, headlights and mirrors. Policyholders with long daily commutes may find this inexpensive endorsement valuable, as most windshield replacements and repairs cost less than the average $500 deductible.
Misconceptions
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Uninsured and underinsured motorist insurance covers only a policyholder's medical expense -- not the vehicle -- when hit by a driver with poor or no coverage. Collision insurance, minus the deductible, covers damage to a policyholder's auto when hit by an uninsured motorist. Those opting for only liability coverage will not have the damage repaired by their insurance company.
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References
Resources
- Photo Credit car crash image by dawn from Fotolia.com
