You’ll want to take a close look at your car insurance plan after reading this

by | Aug 22, 2023 | Financial Independence

You’ll want to take a close look at your car insurance plan after reading this

by | Aug 22, 2023 | Financial Independence

Not all auto coverage limits are created equal. There’s a good chance your plan won’t fully cover your next accident.

My in-laws recently had an auto accident, and while they were fortunate to walk away safe, they were deemed at fault.

To make matters worse, they didn’t hit just any vehicle; it was a large truck towing an incredibly expensive boat. They were in Florida after all. A smaller car was also impacted by the crash.

Despite the damage, my in-laws presumed it was financially no big deal. They had insurance so it would simply cover everything, right?

Not exactly.

Auto insurance policies have built-in coverage limits. You determine those coverage limits when you renew and/or when you purchase a new policy. The more coverage you carry on your vehicle(s) the more you’ll pay for that insurance plan.

My in-laws unfortunately didn’t have a plan that covers damage to a $375,000 boat, an $80,000 truck, and a $50,000 car, on top of the personal injury claims. Not to mention, my in-laws also needed a new truck themselves, which added another $60,000 into the mix.

Overall, my in-laws incurred a lot of damage and plenty of bad luck. They also learned a major lesson: not all auto insurance is created equal.

Watching my in-laws go through their insurance fiasco made me pause and consider my family’s auto coverage. You should too.

If you’re like me, you’re hands off and let your auto plan renew every year. The problem is, before you know it, that plan you had when you were a broke, 20-year-old college student is still with you over a decade later. As a busy professional, letting your policy renew automatically gives you one less thing to worry about in the moment. However, your passiveness can cause a bigger headache down the road, when things like crashes unexpectedly happen.

While I thought our insanely high insurance payments rates translated into top-tier coverage, my gut dropped when I realized we had the bare minimums on our policy, according to state regulations. This means we had $100,000 of coverage and $20,000 of property damages. With the cost of things nowadays, that’s not nearly enough to afford our family peace of mind on the road.

This revelation drove me to find coverage that actually… covers us.

I ran a quote through my insurance carrier for what I consider decent coverage. Upgrading my plan would’ve meant a whopping increase of $1,650 per year. That number felt unreasonably high and it’s why I chose to explore other carriers.

After calling the major auto insurers in my town, I found great coverage that saved my family over $250 per month. I was so excited that in our weekly team meeting at KB Financial Advisors, I just had to gush about my good news. My colleague, Landon, in all his wisdom said, “That’s great! What about your umbrella policy?” His comment immediately took the wind out of my sails. How’d I forget that crucial piece?

Alas, my search wasn’t over and I was back to exploring coverage options.

You might be wondering what an umbrella policy is. It’s basically an additional insurance policy that overlaps with your coverage. If you have a claim that exceeds your auto, home, boat, and RV insurance, the umbrella policy kicks in (up to the coverage limit specified) to pay out any additional monies. After a successful search, I scored an additional $1 million in coverage with an umbrella policy for the low price of $30 per month.

Now we’ve got it; the insurance coverage on our car and our RV is sufficient and I have peace of mind. We added boat insurance and now we have an umbrella policy to back everything up. The real kicker is we ended up saving $200 per month for more and better coverage on auto — go figure!

After conducting a tedious search and correcting my mistakes, I figured I can’t be the only one who’s gone through this. That’s why I put together some auto coverage tips to hopefully save you some time, stress, and money:

  • Have at least $100,000-$300,000 in bodily injury liability coverage
  • Consider getting $250,000 property damage coverage
  • Consider having uninsured motorist coverage stacked within a family plan to save a considerable amount of money
  • Get insurance motorist coverage that’s around $100,000-$300,000
  • Keep your deductible at an amount you feel is comfortable for your budget
  • When it comes to your rental car coverage, the base maximum is usually $500, but $1,000 is probably a better limit
  • If (like me) you’re not handy, consider including emergency road service in your coverage
  • Boats should have a minimum coverage of $100,000 liability
  • If you have toys like jet skis, boats, and RVs, and you purchase an umbrella policy, listen up: If you don’t have a plan that specifically covers those items, your umbrella policy most likely won’t cover events related to them
  • When selecting your RV coverage, ensure the correct MSRP is selected. Plans will usually pay out the fair market value of the insured item at the time of coverage. If the MSRP is wrong from the get-go, you’re off to a bad start in the event of an accident
  • Clarify that your RV coverage will also include your tow vehicle

Keep in mind, everyone’s situation is different and some of these tips might not apply to you. Regardless, the above list should be a great starting point.

When you get your quotes, send them to your financial advisors to give a quick review (this would be Jackie or Landon on our team). They’re the experts who know what’s sufficient coverage and what’s not. They can even find gaps (e.g. the umbrella policy suggestion that Landon gave me) in your quotes.

You’re not alone in your auto insurance search

No one’s born knowing the ins and outs of auto insurance. That’s why it’s smart to enlist the help of a financial advisor who’s been there and who can cover your blind spots. Financial advisors don’t just help you with investments — they’ve got your back in all money situations, insurance included.

Book a call today to talk to an expert on our team about setting yourself up for financial success with insurance and beyond.