How increased levels of liability can protect your "toys"

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MIKE FELDER'S INSURANCE COLUMN
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MIKE FELDER'S INSURANCE COLUMN -------------------------------------------------------------------------------- I have always contended that there are two ways to purchase insurance. The first way is what I call the "Just get me what I need" method. The second way is what I call the "Help me get my needs met" method. Everyday I see people selecting their insurance under each category. While each way has it's own merits, purchasing insurance under one method, when the other is actually needed, can result in some bad consequences. The state of California has required each of us to have a minimum amount of liability insurance. This coverage is designed to basically protect everyone else around us and offers no coverage for either our cycle or ourselves. The requirements are as follows; $15,000 per person, $30,000 per accident, and $5000 property coverage. Those limits are strictly adhered to during claims. Take the following example. You have the misfortune to hit someone, causing $20,000 worth of hospital bills and so to that person, as well as $10,000 to a second person. One would think that the damages would fall within the $30,000 per accident limit. WRONG. The first person, would only be able to get a maximum of $15,000, with the second person getting $10,000. Since the $20,000 is over the limit of $15,000, the responsibility of any other claims from that person would be yours! Several companies offer INCREASE LIMITS OF LIABILITY. Each company has their own underwriting guidelines to be met before they will offer these increases to you. These requirements could either be age, driving record, or so on. In some cases, it is necessary to actually purchase a separate policy to add these increases. A commonly misunderstood area on insurance happens during liability claims when you have the misfortune to hit someone else's vehicle. Even though you have coverage for this under your liability/property damage coverage, it is possible to exhaust this area very quickly. $5,000 worth of property damage is quickly becoming to little to fix most vehicles that are damaged in an accident. Should your damage to the other vehicle be above this area, your insurance will pay for the first $5000 and you will be held responsible for the remainder. A situation that I have seen happen more than once. A lot of people are under the impression that a motorcycle can not cause to much damage. That philosophy is the primary foundation to the "Just get me what I need" method of purchasing insurance. The debate needs to go beyond how much damage a cycle can cause and look at the ever increasing costs for repairs to automobiles. Body shops are regularly getting upwards of $100 an hour for work. This coupled with costs for new parts from countries where our dollar is ever shrinking can add to some frightening bills. Don't take my word for it, ask any body shop for a basic idea of what it would cost to repair a car long crease with repainting, new trim pieces, maybe a window, and a mirror. It is scary! The other method, the "Help me get my needs met" method approaches the situation a little differently. Somewhere around our twentieth high school reunion we realize that we picked up some stuff in this trip called life. Could be a house, a car or two, some cycles, and perhaps a savings account or two. I call my cycles toys, the cars are referred to as the Mikemobile and the Mommymobile, and the house is referred to as the cave. However, to anyone who had damage created to them by myself or my cycle, they would be called "Assets" by their attorney. So much for the cute names I have for them, they all represent areas of money that could be tapped into. If I followed the "Just get me what I need" method, I would purchase basic liability ($15,000 per person, $30,000 per accident, $5,000 property damage). I would then be "legal" and have insurance. However, if I had the misfortune to be involved in anything that exceeded the limits of my policy, then the cave, the mommymobile, and the toys would represent the largest sums of money I have to settle any problems. Scary thought! If I followed the "Help me get my needs met" method, I would purchase ADDITIONAL LIMITS OF LIABILITY. We have been in our house a couple of years so there is a buck or two of equity there. The Mommymobile has been paid off and so have the toys. All in all, there is a couple of bucks. All of which could be in serious jeopardy during a claim procedure against me. This is enough of a reason to get the higher limits. The cost? Under $100 a year. Increased limits of Liability are not necessary for everyone. Each of us have our own needs. What is important is knowing how you are approaching the purchase of your insurance. If it is to be done on the "just get me what I need" method, fine. But realize where your exposure lies. In some cases, depending on age, experience, previous insurance, etc, increased limits can be as cheap as $32. If you think that is to expensive, just ponder the following. A person you accidentally injured on or by your cycle, sues you for $60,000 or $100,000. Chances are that your insurance company is going to pay the limit of $15,000 and wash their hands of it. This now puts you with a bill for the other $45,000 to $85,000. Good luck. On the other hand, if you had increase limits of $100,000/$300,000/$25,000, then the insurance company will be sending out lawyers to defend you. After all, it is their $60,000 or $100,000 at risk now. If the suit settles for anything under $100,000, it will not cost you a cent! Neat arrangement ifyou ask me! Check your policy and see what your limits are. Then check your life to see if the limits are adequately covering your toys and cave. Your agent should be able to give you an idea of what it would run to "up" your limits. Again, the smart buyer is the educated buyer!!

Information in this article is probably correct as of the date it was written. Please check with your insurance agent or call Mike at 800-729-2537 before you make any life changing decisions based on what you read here. Comments are always welcome.