You are driving down the road and you go to turn the station on the radio. Your eyes are averted for literally 2 seconds- when “wham” your car comes to a forceful and sudden stop. Your airbag deploys, your seat belt does its job, both keeping you snug in your seat. Your car however, that, is a different story.
Crawling out of your now crumpled auto, you notice that you have hit the minivan in front of you. The minivan, who, had to break suddenly when another car turned abruptly into their lane. Those two seconds mean that you are at fault for the damage to not only your own car- but the car you hit.
Luckily, everyone in the minivan in front of you was wearing seat belts and their airbags deployed as well. But one of the children- the one sitting in the far back of the car- is now throwing up on the side of the road and from the looks of it- he may have a seriously broken arm. The other child has a nasty burn looking welt on her face and another one on her arm. Yep, they are going to the hospital…. And the back of the minivan has considerable damage and one of their side doors won’t even open. Ugh!
But, you have insurance- you went online and named your price (it wasn’t much) and made sure you had the state minimum limits for insurance. So you’re covered, right?
Maybe. Probably Not.
Wisconsin has a minimum insurance coverage law which mandate that drivers have liability coverage in at least a particular amount. Liability coverage means that if you damage someone else’s auto or the person themselves, your insurance will pay out the amount up to the limit that you purchased. If the amount of damage is more than the amount of insurance you purchased, then you will have to come up with the rest of the money yourself.
In Wisconsin, the minimum liability coverage amount are:
$10,000 for property damage.
$25,000 for the injury or death of one person
$50,000 for the injury or death of more than one person (the total accident)
This particular limit is also shown as 25/50/10.
And if you cannot prove that you have this minimal amount of coverage, then you may receive a fine of up to $500
So let’s take a look at our accident. With 25/50/10 insurance, we would have $10,000 worth of liability insurance to pay for the damage to the other person’s minivan. Note: liability does not pay a dime for damage to your own car. It only pays for damage you owe to other people’s property. In order to have insurance for your own car, you must also purchase collision insurance.
In my experience, even a small dent these days costs a minimum of $1,000 to fix! Cars are so expensive to have work done on. And if your accident involves anything mechanical- well, then, you are talking big money. Did you know that the cost to repack airbags after a collision usually runs between $3,000 and $5,000? In our case, a minivan has A LOT of airbags, so it will be on the high side- maybe even more than $5,000. So, by the time we just pay for the airbags, we will almost be to the amount our insurance pays out. This fix is going to cost way more than the $10,000 that we purchased in insurance coverage. Or- they will total the car and we will have to pay for replacing a car, which is again, more than $10,000.
I bet you are wishing you had purchased more property damage coverage already!
Moving on to bodily injury. The state minimum says we had to have $25,000 per person and $50,000 for all of the people. In this accident, we had three people. Two of them (the children), we know are injured with at least minor injuries (thank goodness they were not major). But this starts with an ambulance ride- and let’s just say they are going to transport all three just to get checked out.
The average cost of an ambulance ride is about $600 without using any special equipment. That is $1,800. The average cost of an ER visit (without any tests) is anywhere between $150 – $3,000. Then, our possible concussion victim needs an MRI for his head and an x-ray for his arm. Those average out at $2611 and $460 respectively. Then you find out that the arm is broken at a degree that requires a small surgery to fix.
The way it shakes out is that our broken arm child’s medical bills end up costing $40,000. The other child, with her minor injuries, only cost $8,000 and the driver (mom)’s medical bills cost $4,000. Grand total: $52,000.
At first you are thinking- sweet…. That’s not too bad, right? I will only owe $2,000- because I have insurance for $50,000 for the whole accident!
You have a limit of $25,000 per person. Our broken arm child cost $40,000- so the insurance will only pay for the first $25,000 of his bills- leaving you to cover $15,000!!! But, sure, the other two are definitely covered in your $50,000 limit.
$15,000!?!? Plus whatever I still owed on the car?
Are you independently wealthy? Can you afford to pay those kinds of bills out-of-pocket? Unless you can, the state minimum levels of insurance are not something that you want to carry. In fact, it can be downright dangerous.
A trusted adviser can help you pick out the right coverage.
They can also remind you to add collision and/or comprehensive insurance so that you also don’t end up paying an arm and a leg to replace your own car!