Think your homeowners or renters insurance policy is just about covering your physical home and the stuff inside it? Think again. Most homeowners and renters policies include personal liability insurance coverage, as well — an important type of coverage that can really come in handy if you end up needing it.
Personal liability insurance coverage pays out in the event someone is accidentally hurt or has their belongings damaged on your property, as well as accidental property damage that you or your family may inflict on someone else outside your home. Personal liability coverage helps keep you from paying out of pocket for legal fees and medical bills that can arise from these situations — which can avert a financial catastrophe, given how expensive those costs can be.
Read on to learn more about this important type of insurance coverage and how to ensure you have it (and enough of it, at that).
What Is Personal Liability Insurance?
Now that we’ve got a basic definition of personal liability insurance — insurance that covers expenses you may be liable for in case of accidental injury or damage — let’s take a look at an example.
Say you have a friend over at your house and they accidentally fall down the stairs into your basement, breaking their ankle (and getting really freaked out) in the process. Even a good friend might sue you for damages under these circumstances, not least because medical expenses are so, well, expensive. If your friend doesn’t have medical insurance, the broken ankle alone might cost them up to $2,500 if it’s a simple break that requires a cast… or orders of magnitude higher if it requires surgery.
Chances are you don’t have thousands of dollars to pay out of pocket for your friend’s medical bills, not to mention any legal fees you might incur if they should decide to actually bring you to court on top of all that. Personal liability insurance can come to the rescue here, paying out up to your coverage limit so your assets are protected.
Along with accidental injuries that occur in your home or on your property, personal liability insurance can also protect you from accidental damages perpetrated by your family. For example, maybe your 12-year-old boy accidentally throws a football through your neighbor’s window (oops), shattering the glass and also breaking an expensive picture frame in the process. Personal liability insurance can payout in this instance, too. Phew!
What Does Personal Liability Insurance Cover?
Personal liability insurance can certainly be a godsend in applicable situations, but it doesn’t cover everything. You should always review your policy information to ensure you know exactly what’s covered by your specific plan, but generally speaking, here are the types of expenses personal liability insurance covers:
• Medical bills incurred by visitors who accidentally get injured at your home or as a result of your negligence
• Legal fees incurred if a visitor sues you for injury or damages to their property
• Actual property damage sustained by a visitor to your home, or as a result of your negligence
• Bodily injury and property damage caused by your pets or children, both on and off your home property
As with most other forms of insurance, even covered damages can only be paid up to the given limit written into your policy. For many homeowners insurance plans, that limit is $100,000 per occurrence at a minimum, though there may be specific clauses about how those monies are paid out (more on this in just a minute when we discuss medical payments).
If you decide you need additional coverage, you may be able to obtain it through your homeowners or renters insurance policy (though it may drive up your premium cost). You might also choose to purchase an umbrella insurance policy, which extends your personal liability coverage substantially. Umbrella insurance can be a good idea for those with high net worths or who are at high risk of a personal liability claim.
Most personal liability policies will pay out for the medical expenses of people accidentally injured on your property, even if they don’t sue you for those damages (or you’re not otherwise legally obligated to pay).
However, these medical payments come with their own limits, which may be as low as $1,000 per person. Again, you may be able to purchase higher amounts of coverage, but it’s important to thoroughly review your insurance policy to understand exactly what you’re getting.
What Is Not Covered by Personal Liability Insurance?
We’ve talked a lot about what personal liability insurance covers. But what, specifically, is excluded?
Personal liability insurance does not cover:
• Injuries or property damages caused intentionally by you or your family — liability insurance is for accidents only
• Liability resulting from a car accident — that’s what car insurance is for!
• Accidental injuries or damages you or your family sustain in your own home
• Any bodily injury or damage that occurs as a result of business or professional activities, even if those activities are occurring in your home (that’s why you need a separate business insurance policy)
Of course, the list of what’s not covered by a personal liability insurance plan is always going to be substantially longer than the list of what is covered. If you have questions about your coverage, speak with your insurance agent directly or refer to your policy documentation for full details.
What Else You Need to Know About Personal Liability Insurance
Like other portions of your homeowners or renters insurance policy (or any policy, for that matter), when it comes time to file a personal liability claim, you may still be responsible for some of the expenses. This is called the deductible, and it’s the amount you pay out-of-pocket to cover the damages you’re filing the claim for.
Many homeowners insurance policies have a deductible of $1,000. So, for example, if you’re held accountable for $30,000 of medical and legal fees resulting from a personal liability claim, you’d pay $1,000 and your insurance company would pay $29,000 toward those expenses.
The deductible is separate from the premium cost you pay on a monthly, quarterly or annual basis simply to keep the policy active. And while it may feel like a burden, even a high deductible is a way better deal than having to pay for the entire cost of the damages out of pocket in most cases.
The Takeaway
Personal liability insurance is a type of coverage that protects your assets by paying for bodily injury and property damage accidentally sustained by visitors to your property (or perpetrated by you or your family off your property). This type of coverage is generally baked into a homeowners or renters insurance policy, though you can also purchase additional umbrella insurance coverage to extend your personal liability limit.
While personal liability coverage — and homeowners/renters insurance as a whole — is certainly an important kind of protection, it’s not the only one you should rely on. If you have family members and loved ones who rely on your earnings, you should consider purchasing life insurance, which will help ensure they’ll continue to be taken care of should something happen to you.
SoFi has teamed up with Ladder to offer competitive, easy-to-understand life insurance policies that range from $100,000 to $8 million, and we’ll even help you draft your will and estate plan for free. We don’t require medical tests for eligible applicants, so you can get a decision in minutes — today.
Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, Social Finance. Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under Ladder Life™ policies. SoFi is compensated by Ladder for each issued term life policy.
SoFi Agency and its affiliates do not guarantee the services of any insurance company.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.
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Experian is a registered service mark of Experian Personal Insurance Agency, Inc.
Social Finance, Inc. ("SoFi") is compensated by Experian for each customer who purchases a policy through Experian from the site.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Homeowners insurance may very well be the least sexy part of homeownership — but it is definitely a necessity, in part because your mortgage lender will likely require it.
Whether it’s a cozy micro-cabin or a rambling Colonial, your home is probably the single largest purchase you’ll ever make and your biggest physical asset. An investment like that is worth protecting.
That’s where homeowners insurance comes in; it gives you peace of mind that if you were to have major damage or get robbed (let’s hope not!), there would be funds to repair and restore your home.
So let’s say you’re convinced of the value of a homeowners insurance policy…but you think it’s time to make a change. Perhaps you’re not happy with your coverage or the premium, or maybe you’re moving to a new home and ready for a new policy. Maybe you’re just wondering what your rights are as far as switching goes.
Here’s what you need to know about switching your homeowners insurance policy, as well as a step-by-step guide to getting it done as quickly as possible and with a minimum of hassles.
Can I Switch Homeowners Insurance at Any Time?
Good news: yes! No matter what the reason may be, you’re allowed to change your homeowner’s insurance at any time, which is good, since shopping around for the right policy can save you a lot of money in some instances.
If you’re shopping for a new home as we speak, it can be a good idea to start looking at insurance before you sign the purchase agreement — so nice work on starting this research. And if you’re an existing homeowner looking to save money or simply find a new policy, you absolutely can do so whenever you like, but it’s important to follow the steps in order to ensure you don’t accidentally have a lapse in coverage.
There are certain events that should also trigger a review of your insurance, including paying off your mortgage (your rates may well go down) and adding a pool (your rates may go up). Also, you may find you are offered deals if you bundle your homeowners insurance with, say, your car insurance; that might be a savings you want to consider.
You never know what options might be available out there to help you save some money, and since homeowners insurance can easily cost more than $1,000 per year, it can be well worth shopping around.
How Often Should I Change My Homeowners Insurance?
You’re really the only person who can answer this one — but in general, it’s a good idea to at least review your coverage annually.
However, it does take time and effort, and sometimes, a cheaper policy means less coverage, so it’s not always a good deal. Be sure you’re able to thoroughly review all the fine print and make sure you know what you’re getting.
Ready to change your homeowners insurance? Follow these steps in order to ensure you don’t accidentally sustain a loss in coverage!
Step One: Check the Terms and Conditions of Your Existing Policy
The first step toward changing your homeowners insurance policy is ensuring that you actually want to change it in the first place!
Take a look at your existing policy and see what your coverage is like, and also be sure to look closely to see if there are any specific terms about early termination. While you always have the right to change your homeowners insurance policy, there could be a fee involved. In many instances, you may have to wait a bit to receive a prorated refund for unused coverage.
Step Two: Think about Your Coverage Needs
Once you have a handle on what your current insurance covers, you can start shopping for new insurance in an informed way. You probably don’t want to “save money” by accidentally purchasing a less comprehensive plan. But do think about how your coverage needs may have shifted since you last purchased homeowners insurance. For example, the value of your home may have changed (lucky you if your once “up and coming” neighborhood is not officially a hot market). Or perhaps you’ve added on additional structures or outbuildings and need to bump up your policy to cover those.
Step Three: Research Different Insurance Companies
Now comes the labor-intensive part: Getting out there and looking around at other available insurance policies to see what’s on offer. Be sure to keep in mind your current premiums and deductibles as you shop around, as saving money is likely one of the main objectives of this exercise. Though sometimes, higher costs are worth it for better coverage. Make sure you are carefully comparing coverage limits, deductibles, and premiums to get the best policy for your needs. Also consider whether the policy is providing actual cash value or replacement value. You may want to opt for a slightly pricier “replacement value” so you have funds to go out and buy new versions of any lost or damaged items, versus getting a lower, depreciated amount.
In addition to the theoretical coverage you encounter, it’s a good idea to stick with insurers with a good reputation. All the coverage in the world doesn’t matter if it’s only on paper; you need to be able to get through to customer service and file a claim when and if the time comes! Fortunately, many online reviews are available that make this vetting process a lot easier. A few reputable sources for ratings: The Better Business Bureau and J.D. Power’s Customer Satisfaction Survey and Property Claims Satisfaction Study. You can also do some of the footwork yourself by calling around to get quotes, though this is time-intensive and you might want to simply use an online comparison tool instead.
Step Four: Start Your New Policy, Then Cancel Your Old One
Found a new insurance plan that suits your needs better than your current one? Great news — but here’s the really important part: You want to get that new policy started BEFORE you cancel your old one.
That’s because even a short lapse in coverage could jeopardize your valuable investment, as well as drive up premiums in the future. Once you’ve made the new insurance purchase call and have your new declarations page in hand, you are ready to make the old insurance cancellation call. Go ahead, and be sure to verify the following with your old insurer:
• The cancellation date is on or after the new insurance policy’s start date.
• The old insurance policy won’t be automatically renewed and is fully cancelled.
• If you’re entitled to a prorated refund, find out how it will be issued and how long it will take to arrive.
Presto-chango and congratulations: You’ve got new homeowners insurance!
Step Five: Let Your Lender Know
The last step, but still a very important one, is to notify your mortgage lender about your homeowners insurance change. Most mortgage lenders require homeowners insurance, and they need to be kept up-to-date on who’s got your back should calamity strike. Additionally, if you still owe more than 80% the home value to your lender, they may still be paying the insurer for you through an escrow account — so you definitely want to make sure those payments are going to the right company.
The Takeaway
Homeowners insurance is an important but often expensive form of financial protection — it can help you cover the cost of repairing or rebuilding your home if you undergo a covered loss or damage. Since our homes are such valuable investments, they’re worth safeguarding… and most mortgage lenders require homeowners insurance in any case.
Sometimes, changing your policy can help you save money for comparable or better coverage. Reviewing and possibly rethinking your homeowners insurance is an important process, especially as your needs and lifestyle evolve. If you’ve added on to your home, put in a pool, bought a prized piece of art, or are enduring more punishing weather, all are signals that you should take a fresh look at your policy and make sure you’re well protected.
SoFi Can Help Protect You Too
While homeowners insurance protects your most important physical asset, it doesn’t protect the most important thing you have: your life. If you have family members or dependents who depend on your income for their comfort and stability, looking into life insurance may be a good idea.
Life insurance can help ensure the ongoing comfort and support of your loved ones in the event that something happens to you. SoFi has teamed up with Ladder to offer competitive term life insurance plans that range from $100,000 to $8 million, and we don’t require medical testing for eligible applicants seeking up to $3 million in coverage — just fill out an online application and you’ll have your decision in minutes.
Photo credit: iStock/MonthiraYodtiwong
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, Social Finance. Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under Ladder Life™ policies. SoFi is compensated by Ladder for each issued term life policy.
SoFi Agency and its affiliates do not guarantee the services of any insurance company.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.
By Janet Siroto |
Insurance |
Comments Off on How Much Auto Insurance Do I Really Need?
Figuring out just how much car insurance you really need can be a challenge.
At minimum, you’ll want to make sure you have enough car insurance to meet the requirements of your state or the lender who’s financing your car. Beyond that, there’s coverage you might want to add to those required amounts. These policies will help ensure that you’re adequately protecting yourself, your family, and your assets. And then there’s the coverage that actually fits within your budget.
We know it may not be a fun topic to think about what would happen if you were involved in a car accident, but given that well over five million drivers are involved in one every year, it’s a priority to get coverage. Finding a car insurance policy that checks all those boxes may take a bit of research — and possibly some compromise. Here are some of the most important factors to consider.
How Much Car Insurance Is Required by Your State?
A good launching pad for researching how much car insurance you need is to check what your state requires by law. Only two states do not require a car owner to carry some amount of insurance: New Hampshire and Virginia. If you live elsewhere, find out how much and what types of coverage a policyholder must have. Typically, there are options available. Once you’ve found this information, consider it the bare minimum to purchase.
Types of Car Insurance Coverage
As you dig into the topic, you’ll hear a lot of different terms used to describe the various kinds of coverage that are offered. Let’s take a closer look here:
Liability Coverage
Most states require drivers to carry auto liability insurance. What it does: It helps pay the cost of damages to others involved in an accident if it’s determined you were at fault. Let’s say you were to cause an accident, whether that means rear-ending a car or backing into your neighbor’s fence while pulling out of a shared driveway. Your insurance would pay for the other driver’s repairs, medical bills, lost wages, and other related costs. What it wouldn’t pay for: Your costs or the costs relating to passengers in your car.
Each state sets its own minimum requirements for this liability coverage. For example, in California, drivers must carry at least $15,000 in coverage for the injury/death of one person, $30,000 for injury/death to more than one person, and $5,000 for damage to property. The shorthand for this, in terms of shopping for car insurance, would be that you have 15/30/5 coverage.
But in Maryland, the amounts are much higher: $30,000 in bodily injury liability per person, $60,000 in bodily injury liability per accident (if there are multiple injuries), and $15,000 in property damage liability per accident. (That would be 30/60/15 coverage.)
And some may want to go beyond what the state requires. If you carry $15,000 worth of property damage liability coverage, for example, and you get in an accident that causes $25,000 worth of damage to someone else’s car, your insurance company will only pay the $15,000 policy limit. You’d be expected to come up with the remaining $10,000.
Generally, recommendations suggest you purchase as much as you could lose if a lawsuit were filed against you and you lost. In California, some say that you may want 250/500/100 in coverage – much more than the 15/30/5 mandated by law.
Collision insurance pays to repair or replace your vehicle if it’s damaged in an accident with another car that was your fault. It will also help pay for repairs if, say, you hit an inanimate object, be it a fence, tree, guardrail, building, dumpster, pothole, or anything else.
If you have a car loan or lease, you’ll need collision coverage. If, however, your car is paid off or isn’t worth much, you may decide you don’t need collision coverage. For instance, if your car is old and its value is quite low, is it worth paying for this kind of premium, which can certainly add up over the years?
But if you depend on your vehicle and you can’t afford to replace it, or you can’t afford to pay out of pocket for damages, collision coverage may well be worth having. You also may want to keep your personal risk tolerance in mind when considering collision coverage. If the cost of even a minor fender bender makes you nervous, this kind of insurance could help you feel a lot more comfortable when you get behind the wheel.
Comprehensive Coverage
When you drive, you know that unexpected events happen. A pebble can hit your windshield as you drive on the highway and cause a crack. A tree branch can go flying in a storm and put a major dent in your car. Comprehensive insurance covers these events and more. It’s a policy that pays for physical damage to your car that doesn’t happen in a collision, including theft, vandalism, a broken window, weather damage, or even hitting a deer or some other animal.
If you finance or lease your car, your lender will probably require it. But even if you own your car outright, you may want to consider comprehensive coverage. The cost of including it in your policy could be relatively small compared to what it would take to repair or replace your car if it’s damaged or stolen.
Personal Injury Protection and Medical Payments Coverage
Several states require Personal Injury Protection (PIP) or Medical Payments coverage (MedPay for short). This is typically part of the state’s no-fault auto insurance laws, which say that if a policyholder is injured in a crash, that person’s insurance pays for their medical care, regardless of who caused the accident.
While these two types of medical coverage help pay for medical expenses that you and any passengers in your car sustain in an accident, there is a difference. MedPay pays for medical expenses only, and is often available only in small increments, up to $5,000. PIP may also cover loss of income, funeral expenses, and other costs. The amount required varies hugely depending on where you live. For instance, in Utah, it’s $3,000 per person coverage; in New York, it’s $50,000 per person.
Uninsured/Underinsured Motorist Coverage
Despite the fact that the vast majority of states require car insurance, there are lots of uninsured drivers out there. The number of them on the road can range from one in eight to one in five! In addition, there are people on the road who have the bare minimum of coverage, which may not be adequate when accidents occur.
For these reasons, you may want to take out Uninsured Motorist (UM) or Underinsured Motorist (UIM) coverage Many states require these policies, which are designed to protect you if you’re in an accident with a motorist who has little or no insurance. In states that require this type of coverage, the minimums are generally set at about $25,000 per person and $50,000 per accident. But the exact amounts vary from state to state. And you may choose to carry this coverage even if it isn’t required in your state.
If you’re seriously injured in an accident caused by a driver who doesn’t carry liability car insurance, uninsured motorist coverage could help you and your passengers avoid paying some scary-high medical bills.
Let’s take a quick look at some terms you may see if you shop for this kind of coverage:
Uninsured motorist bodily injury coverage (UMBI)
This kind of policy covers your medical bills, lost wages, as well as pain and suffering after an accident when the other driver is not insured. Additionally, it provides coverage for those costs if any passengers were in your vehicle when the accident occurred.
With this kind of policy, your insurer will pay for repairs to your car plus other property if someone who doesn’t carry insurance is responsible for an accident. Some policies in certain states may also provide coverage if you’re involved in a hit-and-run incident.
Underinsured motorist coverage (UIM)
Let’s say you and a passenger get into an accident that’s the other driver’s fault, and the medical bills total $20,000…but the person responsible is only insured for $15,000. A UIM policy would step in and pay the difference to help you out.
Here’s another kind of insurance to consider: GAP insurance, which recognizes that cars can quickly depreciate in value and helps you manage that. For example, if your car were stolen or totaled in an accident (though we hope that never happens), GAP coverage will pay the difference between what its actual value is (say, $5,000) and what you still owe on your auto loan or lease (for example, $10,000).
GAP insurance is optional and generally requires that you add it onto a full coverage auto insurance policy. In some instances, this coverage may be rolled in with an auto lease.
Non-Owner Coverage
You may think you don’t need car insurance if you don’t own a car. (Maybe you take public transportation or ride your bike most of the time.) But if you still plan to drive occasionally — when you travel and rent a car, for example, or you sometimes borrow a friend’s car — a non-owner policy can provide liability coverage for any bodily injury or property damage you cause.
The insurance policy on the car you’re driving will probably be considered the “primary” coverage, which means it will kick in first. Then your non-owner policy could be used for costs that are over the limits of the primary policy.
Rideshare Coverage?
If you drive for a ridesharing service like Uber or Lyft, you may want to consider adding rideshare coverage to your personal automobile policy.
Rideshare companies are required by law in some states to provide commercial insurance for drivers who are using their personal cars — but that coverage could be limited. (For example, it may not cover the time when a driver is waiting for a ride request but hasn’t actually picked up a passenger.) This coverage could fill the gaps between your personal insurance policy and any insurance provided by the ridesharing service. Whether you are behind the wheel occasionally or full-time, it’s probably worth exploring.
Car insurance is an important layer of protection; it helps safeguard your financial wellbeing in the case of an accident. Given how much most Americans drive – around 14,000 miles or more a year – it’s likely a valuable investment.
What If You Don’t Have Car Insurance?
There can be serious penalties for driving a car without valid insurance. Let’s take a look at a few scenarios: If an officer pulls you over and you can’t prove you have the minimum coverage required in your state, you could get a ticket. Your license could be suspended. What’s more, the officer might have your car towed away from the scene.
That’s a relatively minor inconvenience. Consider that if you’re in a car accident, the penalties for driving without insurance could be far more significant. If you caused the incident, you may be held personally responsible for paying any damages to others involved; one recent report found the average bodily injury claim totaled more than $20,000. And even if you didn’t cause the accident, the amount you can recover from the at-fault driver may be restricted.
If that convinces you of the value of auto insurance (and we hope it does), you may see big discrepancies in the amounts of coverage. For example, there may be a tremendous difference between the amount you have to have, how much you think you should have to feel secure, and what you can afford.
That’s why it can help to know what your state and your lender might require as a starting point. Keep in mind that having car insurance isn’t just about getting your car — or someone else’s — fixed or replaced. (Although that — and the fact that it’s illegal to not have insurance — may be motivation enough to at least get basic car insurance coverage.)
Having the appropriate levels of coverage can also help you protect all your other assets — your home, business, savings, etc. — if you’re in a catastrophic accident and the other parties involved decide to sue you to pay their bills. And let us emphasize: Your state’s minimum liability requirements may not be enough to cover those costs — and you could end up paying the difference out of pocket, which could have a huge impact on your finances.
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Finding the Best Car Insurance for You
If you’re convinced of the value of getting car insurance, the next step is to decide on the right policy for you. Often, the question on people’s minds is, “How can I balance getting the right coverage at an affordable price?”
What’s the Right Amount of Car Insurance Coverage for You?
To get a ballpark figure in mind, consider these numbers:
Type of Coverage
Basic
Good
Excellent
Liability
Your state’s minimum
• $100,000/person for bodily injury liability
◦ $300,000/ accident for bodily injury liability
◦ $100,000 for property damage
• $250,000/person for bodily injury liability
◦ $500,000/ accident for bodily injury liability
◦ $250,000 for property damage
Collision
Not required
Recommended
Recommended
Comprehensive
Not required
Recommended
Recommended
Personal Injury Protection (PIP)
Your state’s minimum
$40,000
Your state’s maximum
Uninsured and Underinsured Motorist (UM, UIM) Coverage
Your state’s minimum
• $100,000/person for bodily injury liability
◦ $300,000/ accident for bodily injury liability
• $250,000/person for bodily injury liability
◦ $500,000/ accident for bodily injury liability
Here are some points to consider that will help you get the best policy for you.
Designing a Policy that Works for You
Your insurance company will probably offer several coverage options, and you may be able to build a policy around what you need based on your lifestyle. For example, if your car is paid off and worth only a few thousand dollars, you may choose to opt out of collision insurance in order to get more liability coverage.
Choosing a Deductible
Your deductible is the amount you might have to pay out personally before your insurance company begins paying any damages. Let’s say your car insurance policy has a $500 deductible, and you hit a guardrail on the highway when you swerve to avoid a collision. If the damage was $2,500, you would pay the $500 deductible and your insurer would pay for the other $2,000 in repairs. (Worth noting: You may have two different deductibles when you hold an auto insurance policy — one for comprehensive coverage and one for collision.)
Just as with your health insurance, your insurance company will likely offer you a lower premium if you choose to go with a higher deductible ($1,000 instead of $500, for example). Also, you typically pay this deductible every time you file a claim. It’s not like the situation with some health insurance policies, in which you satisfy a deductible once a year.
If you have savings or some other source of money you could use for repairs, you might be able to go with a higher deductible and save on your insurance payments. But if you aren’t sure where the money would come from in a pinch, it may make sense to opt for a lower deductible.
As you assess how much coverage to get, here’s some good news: Buying twice as much liability coverage won’t necessarily double the price of your premium. You may be able to manage more coverage than you think. Before settling for a bare-bones policy, it can help to check on what it might cost to increase your coverage. This information is often easily available online, via calculator tools, rather than by spending time on the phone with a salesperson.
Finding Discounts that Could Help You Save
Some insurers (including SoFi Protect) reward safe drivers or “good drivers” with lower premiums. If you have a clean driving record, free of accidents and claims, you are a low risk for your insurer and they may extend you a discount.
Another way to save: Bundling car and home insurance is another way to cut costs. Look for any discounts or packages that would help you save.
The Takeaway
Buying car insurance is an important step in protecting yourself in case of an accident or theft. It’s not just about repairing or replacing your vehicle. It’s also about ensuring that medical fees and lost wages are protected – and securing your assets if there were ever a lawsuit filed against you. These are potentially life-altering situations, so it’s worth spending a bit of time on the few key steps that will help you get the right coverage at the right price. It begins with knowing what your state or your car-loan lender requires. Then, you’ll review the different kinds of policies and premiums available. Put these pieces together, and you’ll find the insurance that best suits your needs and budget.
A Simple Way to Get Great Car Insurance
Feeling uncertain about how much auto insurance you really need or what kind of premium you might have to pay to get what you want? Check out SoFi Online Auto Insurance. We partner with Experian to bring you quotes from up to 40 top insurance carriers. Match your current coverage to new policy offers with little to no data entry.
SoFi’s Insights tool offers users the ability to connect both in-house accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
¹SoFi’s Insights tool offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. Vehicle Identification Number is confirmed by LexisNexis and car values are provided by J.D. Power. Auto Tracker is provided on an “as-is, as-available” basis with all faults and defects, with no warranty, express or implied. The values shown on this page are a rough estimate based on your car’s year, make, and model, but don’t take into account things such as your mileage, accident history, or car condition.
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