How much auto insurance coverage do I need?

As lawyers who represent victims of car crashes, we often are looking into our clients’ auto insurance coverage. While the insurance company from whom you choose to purchase insurance is not as important, the amount of coverage you purchase is absolutely important. We will address the different types of coverage available and offer our recommendations for how much you should purchase.

When you purchase auto insurance, you are actually buying several different types of coverage. These include liability coverage, medical payments coverage, uninsured or underinsured motorist coverage, comprehensive/collision coverage, and rental car reimbursement. You can select different amounts of coverage for each of the above all of which will impact your monthly premiums.

When people think of car insurance they typically think of what is called “liability coverage.” This is the only type of coverage required by law. When you purchase this insurance, your insurance company agrees to pay up to a certain amount for damages or injuries caused in accidents that are your fault. In Colorado, the minimum amount of coverage required by law is $25,000 per person/$50,000 per incident. This means that if you cause an accident and hurt another individual, your insurance company will pay up to $25,000 per person and $50,000 per accident. For many people, the minimum amount of coverage is fine. However, if you own significant assets it probably makes sense to purchase more coverage. That is because you may one day be liable for damages that exceed your insurance coverage, and in those instances your assets might be the subject of a judgment against you. For example, imagine you cause an accident in which the injured party has $100,000 in medical bills but you only have $25,000 in liability coverage. If you don’t have many assets, the lawyer representing the injured party is likely to only go after the $25,000 policy. However, if you own a million-dollar home and make $300,000 a year, that same lawyer may decide to come after you personally.

Another type of coverage available in Colorado is called medical payments coverage. This is often referred to as “med pay.” Med pay covers any of your medical bills that arise from an accident. Med-pay claims are often paid very quickly, which can be a huge benefit to an injured person and is an important contrast from other types of insurance claims that can take over a year to settle in some situations. Importantly, this covers medical bills regardless of who is at fault. So if you are in an accident where the other driver is at fault, your med pay will cover your medical bills while you work with the other driver’s insurance company to settle your claim. In Colorado, the minimum med-pay coverage offered is $5000.00. We recommend that you purchase at least $10,000 in coverage but having even more can be a real help. The best part of med-pay coverage is that it is extremely cheap compared to liability coverage.

Another important type of coverage available in Colorado is “‘uninsured’ or ‘underinsured’ motorist coverage,” commonly referred to as UM or UIM coverage. These policies come into play if you are in an accident caused by another driver and that driver either has 1) no insurance or 2) insurance coverage that is less than the amount of your injuries. Using the same example as above, if you are in an accident where you have $100,000 worth of damages but the other driver only has a $25,000 policy, UIM coverage would step in and cover the difference. The minimum amount of UIM coverage offered in Colorado is $25,000 per person/$50,000 per incident, but we recommend purchasing at least $100,000/$200,000 in coverage, and even more if you can afford it. Like med pay, this coverage is inexpensive compared to your liability coverage. You do not want to be in a situation where you are seriously injured in an accident but are unable to collect enough money to cover your medical bills, lost wages, or permanent impairment. One thing to note, many companies require that you have as much liability coverage as you do UIM coverage. This means you need to purchase $100,000 in liability coverage if you also want $100,000 in UIM coverage. This is worth it!

The rest of the coverages available usually do not have a large impact on accident litigation. Collision/comprehensive policies (often referred to as full coverage) cover damage to your car caused in accidents that were your fault or when random things happen like a tree branch falling on your car. Rental car reimbursement will pay for your rental car while your car is getting repaired. These types of coverage come down to personal choice. Would you rather pay a little money now for peace of mind later? Or would you rather roll the dice and save money now but possibly have a large expense later? The former is ideal, but ultimately it is a matter of personal preference or financial ability.

It is important to know and understand the different types of auto insurance coverage that are available to you. Liability coverage is important, but for the majority of our clients injured in accidents, med-pay and UM/UIM coverage make all the difference. Look over your policy today and make sure you are protected.  Of course, if you are ever in an accident call Cheney Galluzzi & Howard right away!