In these tough economic times, we're struggling to make ends meet. I know we have to have car insurance, but is there anything we can do to reduce the cost?
Liability insurance (First in a series.)
There are a number of things you could consider that might reduce the cost of your car insurance. We recommend periodically going over your insurance policies with your agent or customer service representative to be sure you have the right coverage for your situation. We find that many consumers could use some help understanding how car insurance works, so over the next several weeks, I'm going to address each coverage part and how you may select the right coverage for you. Let's look first at the insurance protection you're required to have by law.
If you drive a car on public roadways, the Motor Vehicle Code requires you to have liability coverage to protect you from claims made by others who contend you're responsible for damaging their property or injuring them. The Insurance Code requires uninsured motorist coverage and personal injury protection as well, but in this column we're going to cover liability insurance.
Your insurance policy will typically have a section that is captioned "liability insurance" and an insuring agreement that says something like: "We will pay damages for bodily injury or property damage for which any insured becomes legally responsible because of an auto accident." You select the limits of coverage, but the law does require a minimum of $25,000 for any one person for injury, $50,000 for any one accident for injury, and $20,000 for property damage. Let's illustrate how this might work if you were in an accident.
Suppose you were momentarily distracted and rear-ended another car. The damage to the car ahead is $2,500 and the driver and passenger were injured. Your insurance company would investigate to determine responsibility, generally pretty clear with a rear-end collision, verify and pay for the damage to the car and negotiate with the injured parties to resolve their claims.
Sometimes your insurance company and the injured parties cannot come to an agreement. In that case, the injured party may retain an attorney and file a lawsuit. This is another important part of your liability coverage. Your insurance company will retain an attorney for you and provide a defense. Car insurance policies generally allow the insurance company to settle or defend as they consider appropriate
There are some things your insurance company will not pay for, even though you might be responsible. If you injure someone or damage their property intentionally, for example, or if the accident happens while you're using your car to transport people or property for a fee. We recommend going over the exclusions with your agent or customer service representative.
Liability insurance may not be the best place to save money. If you're involved in a serious accident, minimum limits may not be adequate to protect you. We recommend carefully evaluating your personal situation and buying adequate limits to protect you and your family.
If you experience difficulties with your insurance company or agent, our advocacy team is available to assist at 1-888-877-4894. We cannot determine responsibility or how much a company should pay for a liability claim, and we cannot provide legal advice, but we can make sure the insurance company is in compliance with the law the terms of the policy.
Next time we'll cover uninsured motorist coverage.
