M.P. McQueen reported in Wednesday’s Wall Street Journal on the national trend of more drivers are letting their car insurance lapse because of the faltering economy. Doing this puts themselves and others – including you – at risk.
McQueen did a good job highlighting the irresponsibility of not carrying liability insurance, and the importance of matching your own liability insurance to the value of your assets.
Are Minimum Auto Liability Insurance Limits Enough?
Maine law requires all drivers to carry at least $50,000 per person / $100,000 per accident of Bodily Injury coverage, and $25,000 of Property Damage coverage. It doesn’t take much imagination to picture this limit as being inadequate to handle even a moderately severe accident, or replacement of even a mid-priced late model car.
Once you blow through your insurance coverage, your assets are fully exposed.
How to Protect Yourself from an Uninsured Driver
Most people don’t realize that the flip side of liability coverage is Uninsured/Underinsured Motorist coverage. This covers your injuries if you’re struck by an at-fault driver who has no insurance, or less than you do.
There’s the rub: if you and the other guy both have state minimum limits, your UIM coverage doesn’t apply, because you didn’t have more than he did. If you suffer more than $50,000 of medical expenses (it doesn’t take all that much – trust me), you’re on your own.
Although we’re in the business of selling insurance, we understand that people have to live within their budgets and prioritize their expenses. If the economy forces you to cut your auto insurance expenses, we suggest:
- Look at your deductibles first. It might sting to pay the first $500 or $1,000 of repair costs after an accident, but at least it’s a known cost, with a maximum out-of-pocket.
- If you really need to cut auto insurance to the bone, consider removing physical damage (comprehensive & collision) coverage. If you have a loan or lease on the vehicle, you’re not going to be able to do this. Also, if you don’t have physical damage coverage on at least one car, you don’t have that coverage if you rent a car either. But, desperate times call for tough decisions.
- If you have more than one car, think about “laying one up”. You can suspend coverage for the time it’s stored. Just remember to call your agent before you drive it again, because it has no coverage.
- Try to pay your auto premiums on time. Paying late can jeopardize your coverage, especially if you slip up and your policy actually cancels one time. The Maine Insurance Dept. has an excellent set of FAQ, one of which offers the same counsel.
If you’re fortunate, and in expense-maintenance vs. expense-slashing mode, make sure that your liability coverage protects your assets, and your UIM coverage is adequate. And regardless of the law, don’t count on the other driver having insurance.