By Ross Turner
These days, all you have to do is turn on your television and you hear people screeching and screaming that they were hit by a truck and got $1.2 million dollars. Or you hear you shouldn’t trust the insurance company and to dial all 2’s or 9’s if you have been injured.
Commercials such as these make you wonder:
• Do I need higher insurance limits when I am just starting out and don’t have much net worth?
• How much insurance is really enough?
• Are all of my “toys” properly covered?
The answer to all of the above is that the need for insurance and good advice on how much coverage you need has never been greater. When it comes to your vehicles, auto insurance pays to fix two things – property damage and people. Unfortunately, the cost of both has increased dramatically.
In the past, the cost was around $800 to fix a bumper if you rear-ended someone. But now, chances are there is a camera in the bumper, so repairs can easily top $4,000. We love the technology that comes standard in many automobiles, but these features can be costly to repair.
In addition, the cost of fixing people (i.e. medical costs, also known as bodily injury), has skyrocketed. A helicopter transport from the scene of an accident can cost $30,000, and if you are seriously injured enough for a helicopter, you could be billed as much as $100,000 for emergency room charges. That’s what the advertisements are talking about.
Costs are also rising because distracted driving has become a serious problem on today’s roads. Even if you don’t believe you’re distracted, you and your loved ones still share the road with drivers who are. Pedestrian fatalities have almost doubled in the last five years. With more people walking and biking on the road and the increase in distracted driving, we are all one step away from having a large claim filed against us.
Young couples starting out are trying to watch their budgets and would love to save money on their insurance. They typically don’t have a large accumulation of assets and don’t feel the need for higher limits. But the reality is, you don’t have to be wealthy to be sued. If you have a paycheck, then you have an asset. The court can put a lien on your future earnings for liability settlements the same way family court can put liens on your earnings for alimony.
On the other end of the spectrum are people who have accumulated assets and are looking forward to retirement with a nice nest egg, as well as those who sell a business and suddenly have a huge net worth. The question here isn’t just how much insurance is needed, but do you have enough coverage for your second home, boat, golf cart, ATV for your Hunt Club, collector car, airplane, housekeeper, or rental homes. Properly insuring someone in this position can be more complicated than a business insurance portfolio.
So what is the answer to how much is enough? Or as they say in the retirement commercials, “What’s your number?” The easy answer is – whatever amount will make the screeching go away! Ultimately the number is different for everyone, but we suggest that at a minimum you purchase the highest limits available, along with an umbrella policy. If you want to self insure your risk, do it on your property coverage through the use of deductibles. Then use the savings to purchase the limits of liability necessary to protect your financial dreams.