Is Minimum Coverage a Massive Mistake?

 By Catherine Powell

Image courtesy Pixabay

Times are tough and money is tight.  We all need to conserve cash.  I understand that.  Most people these days are cutting back on everything from entertainment and eating out to vacations and impulse buying.  Many of us are looking for ways to tighten our belts in order to reduce our overhead.  That's all well and good.  While reducing your overhead is always a good idea, when it comes to insuring your assets you need to crunch some numbers before you pare your coverage to the bone.  To help you decide what to cut and what to keep, below are ten things you need to consider when assessing your insurance needs.

#1: Do auto insurance minimums leave you maximally at risk?  They do when you factor in the average cost of vehicles nowadays.  In Florida you can legally drive provided you have at least $10,000 in Personal Injury Protection (PIP) and $10,000 in Property Damage Liability.  Given that the average cost of a new car is more than $48,000 and the average used car costs more than half that, ten grand doesn't buy you much.  Get involved in an accident that totals your current ride and you'll not only be forced to pay for the balance of your current auto loan, but you'll also have to dig deep to purchase a new car.   

#2: Can a collision crash your bank account? It can if you opt out of collision coverage.  Late model automobiles and light trucks aren't so much motor vehicles as computer systems with 4-tires and a steering wheel.  When they're involved in an accident, the cost to repair one can be much steeper than they were 30-years ago.  That's because it's no longer sufficient to bang out the dents, fill the holes, and paint over the damage caused by a collision.  In many cases you have to replace the airbags and reset all the sensors in a vehicle after a crash. If the accident results in damage to the front end of the vehicle, it may require extensive and expensive replacement of crumple zones designed to protect the driver and passengers.  With collision coverage, your insurance company would pay for these repairs, minus your deductible.  Without it, not only will the cost be all yours to repair your ride, you could be forced to shell out even more to pay for a rental car while your ride is in the shop.

#3: Who's liable in an auto accident?  While Florida is a no-fault state, depending on the amount of damage done in an auto accident, a driver can still be sued in Florida since no-fault laws don't apply to property damage.  How likely you are to get sued depends on whether you and your insurer can cover the damage done during an accident.  $10,000  in property damage doesn't go very far today. Even if the other driver doesn't immediately take you to court, that doesn't necessarily let you off the hook since a suit may be initiated in the Florida for up to 4-years from the date when the accident occurred.

Image courtesy Pixabay

#4: How comprehensive is your coverage if you minimize your auto insurance? Like it or not, there are many things that can damage or destroy your vehicle whether you happen to be in it or not.  If your car gets hit by a bolt of lightning, washed away by a flood, or has a big oak tree come crashing down on it, comprehensive coverage will pay to repair the damage, minus your deductible.  The same goes if your vehicle is stolen or vandalized, burnt up in a fire, or it resembles a golf ball after a passing hail storm pummels it.  Speaking of golf balls, if one were to hit and crack your windshield, comprehensive coverage would pay to replace it.  Whether you accidentally hit a deer on the highway, or a bear tears a door off your car to get at the ho-hos in the glove box when you park at a campsite, comprehensive coverage is the only way to keep from digging deep in your wallet to pay for non-traffic related incidents.

#5: How much do you owe on your vehicle? Cars and light trucks depreciate quickly, particularly when they're new.  Just driving off the lot can decrease their value by 10% or more.  In the first year, an automobile will depreciate by up to 20%.  The following year they lose an average of 15% more value.  Should your ride get totaled during the first few years of ownership, you'll be forced to dig deep to purchase another vehicle of similar value.  That's because your insurer is only obligated to pay the depreciated value of your vehicle if you carry minimal coverage. (If you had gap coverage, this would make up the difference.)

#6: How to turn home-sweet-home into a hole into which you pour money.  Even though homeowner's insurance is more expensive today than it was a few years ago, before you choose to minimize or drop your coverage, understand what you'll be giving up.  Since a home is one of the biggest investments most of us will make in our lifetimes, short sheeting its protection could be something you could later come to regret.  Were a fire to break out or a big storm come roaring down your street, do you have the financial wherewithal to repair what could amount to tens of thousands of dollars in damage?  The average cost just to replace a roof in Florida is $11,200.  The average homeowner's insurance claim was $13,804 in 2022.

Image courtesy pixabay

#7: Can you have a party only to be a party to a lawsuit? You can if an invited or uninvited guest happens to injure themselves while attending a party at your home.  With homeowner's insurance you'll have some way to deal with the expense of going to court to defend yourself if you're sued.  Without it, you'll have to cover attorney fees, court costs, and any judgments on your own.  

#8: What happens if one of your doggone neighbors is bitten by your pooch? Depending on the severity of injuries, lost wages, plus pain & suffering, the settlement in a dog-bite suit can be anywhere from $10,000 - $100,000, with the average judgment being $49,025 as of 2022.

#9: Can crooks rob you blind? Personal property theft is an all too common nuisance in the modern world.  Should thieves target your home, they can quickly make off with thousands of dollars worth of merchandise.  If you keep collectibles, art objects or other valuables in your home, it doesn't take long for the losses to add up.

#10: What happens if vandals rock your world?  Should vandals assault your property, your homeowner's policy is designed to help you repair the damage.  This not only includes damage done by human vandals but by bears and deer that decide to take out their frustration on your property.  

If you want to save money on your insurance, give your agent a call.  Independent agents are not only able to look for discounts you may not know you're entitled to, but they can help you reduce the nut while keeping you protected.

Catherine Powell is the owner of A Plus All Florida, Insurance in Orange Park, Florida.  To find out more about saving money on all your insurance needs, check out her website at http://aplusallfloridainsuranceinc.com