What does “Full Coverage” insurance really mean?

When we first meet with a client, we often ask them what insurance coverage they have.  The response is usually, “I have full coverage.”  Most people don’t really know what they need to have.  A few people pay for unnecessary coverage.  Many more are very disappointed to find they don’t have enough or the right kind of coverage when something bad happens.

Liability Coverage:  This is the coverage that takes of things if you make a mistake and hurt someone else, like in the instance of a car accident.  These limits should be high enough that your assets are not at risk.  A student or someone who is just starting out, doesn’t need as much as someone who owns a home and some other property.  Often, doubling or quadrupling your coverage is not nearly as expensive as you would think.

Medical Payments Coverage:  This coverage pays for your medical bills if you are involved in an accident.  Typically, it is fairly small, 1000, 2000 and 5000 are common limits.  Some people have much higher coverages, but if you have health insurance, very high limits on this coverage are not necessary.  It is fairly expensive to raise the limits to high levels on this coverage.

Uninsured and Underinsured Coverage:  This coverage is very important.  It is very inexpensive.  Typically, you can’t have more uninsured/underinsured coverage than liability coverage, but there are a number of people who are either uninsured or underinsured, and this protects you if someone like that hits you.  With as expensive as medical care is, this coverage should probably be at least $100,000 per person and $300,000 per accident, unless there is absolutely no way to afford it.

There are many other coverages, including “umbrella” policies that cover you for very high limits and liabilities.  If you underlying limits are fairly high, an “umbrella” doesn’t cost that much either.

The cost of not having enough coverage can be devastating.  Sometimes, the pie is very small that we are trying to carve up.  Take a look at your declarations page on your next renewal.  Feel free to give us a call if you have questions.  As always, this information is general, and may or may not apply to your situation.

Russ Johnson