Wednesday, January 20, 2021

How much car insurance does Clark Howard recommend?

 Clark Howard, of the Clark Howard Show, offers a litany of advice on insurance related topics. Clark Howard car insurance advice helps you decide things like which companies are known for their customer service, how to save money on your costs, and which policy to choose. But what about how much insurance to take out once you’ve chosen the company known for customer service? 

Exactly how much car insurance does Clark Howard recommend?

First of all, there is no one-size-fits-all solution. Clark Howard does not recommend a single figure for the amount of car insurance every single person should take out. What he does recommend is evaluating other financial aspects like home ownership and assets as an influencer on the total dollar amount. 

Assets matter 

Perhaps the biggest, overall impact to how much car insurance Clark Howard recommends for you is the state of your assets, like whether you rent your house or own it, what investments you have, and how many other assets are under your name. 

Why does this matter?

Because car insurance does not stop at merely fixing a dent when you miss the parking space, or replacing the windshield after a rock came bouncing off the highway. 

It’s about the car repairs, the damage to the cars in the event of an accident, possible bodily harm to yourself or others, medical bills, and unexpected costs which could eat away at your assets. 

If a business owner goes under, they might have to sell all their business assets to cover the debt, even if that debt was unrelated to the core business. Similarly, if you are at fault in a major car accident and other people or property is damaged, you might have to sell all of your personal assets to cover the debt. 

Insurance is there to prevent this from happening. Choosing how much car insurance to take out is contingent upon the following:

Whether you own or rent

Do you own your home or do you rent? If you are a homeowner, you need to consider how many assets you have in addition to the vehicle that you need to protect (and ensure you insure your home). 

If you rent…

.... And your assets are limited, you can get away with whatever minimum requirements are in effect in your state. With little to no assets, as a renter, even if you are at fault in a major accident, there isn’t really anything the other party can take from you. 

If, given limited assets, you could not possibly cover the cost of losing your vehicle completely, be sure to maintain comprehensive and collision coverage regardless of cost.

Minimum Requirements

Let's take a look at those minimum requirements. 

In almost every state you need to carry liability car insurance which is the type of insurance that takes over if you are found at fault for a car accident, if you injure someone, or if you damage their property. 

Liability is further divided into two sections:

  1. Bodily injury liability which, as the name suggests, pay for any physical injuries to other people
  2. Property damage liability, again another straightforward name, which pays for any damage to another person's car or property 

Each state has minimum levels of liability requirements usually displayed as a set of 3 figures such as: 25/50/10. 

The first figure refers to the amount of coverage for each person who sustains bodily injury which in this example will be $25,000. 

The second figure is the maximum coverage for the entire accident which in this example is $50,000. 

The third figure is the amount of coverage for property damage with using this example is $10,000.

Note: Liability coverage does not provide you with any insurance for your injuries or damage to your property.

If you own…

.... And you have some assets (under 1 million dollars) then your coverage should be a minimum of $250,000 for bodily injury and $500,000 per accident, or 250/500. 

This level of protection will go a long way for most homeowners in protecting them from having to sell their home and use the money to pay off the debt from a car accident. 

Remember, the injured party will try and come after whatever you have to cover their medical bills or property damage--unless you have insurance enough to pay them. 

One important note though is that your insurance requirements are going to change, over time, as your situation changes. 

People often forget to increase coverage when they increase assets, but that’s exactly what has to happen. 

  • Get a raise at work and buy a new car? Scale up your coverage. 
  • Sell your first home and buy a second, slightly bigger home? Scale up your coverage. 
  • Promoted at work and given stock options? Scale up your coverage. 

If you own…

.... And you have assets over 1 million dollars, the same 250/500 policy will be an effective minimum, supplemented by an umbrella policy. 

An umbrella policy works like an umbrella, hanging over your other insurance, there for a seriously rainy day. Should you get involved in a major accident, the umbrella policy steps in where your other policies end. These are for homeowners with more serious assets though, as they are only sold in multiples of $1 million. 

How to Save

If the costs of state minimums, or the 250/500 requirement, seems too high for you, there are ways Clark Howard recommends ways to save on your policy:

  • Raise your deductible to at least $1,000.
  • Avoid filing small claims.
  • Take a state approved defensive driver class. 
  • Add anti-theft devices to your car if you don’t already have them. 
  • Drive as safely as you can. 
  • Combine policies, for multiple cars or house and car.

Remember, the goal is insurance is to be there when you need it, protect your assets, and prevent you from losing everything because of an accident. Make sure you have the right amount of coverage based on your situation, and that you scale up or down accordingly.

Tuesday, January 19, 2021

Someone hit my parked car. Will my insurance go up?

 Nothing can ruin an outing faster than going back to your car, ready to head home or arms full of groceries only to realize that someone hit your parked car. Now you want to know: will my insurance go up?

If someone hit your parked car, there are a lot of factors that can influence whether or not your insurance goes up, and what to do next. 

These include:

  • Whether the other driver stuck around, provided contact information, and/or had insurance
  • What your history of claims has been
  • What insurance provider you have, and their internal policy
  • What your state policy is 

What to do if someone hit your parked car

Let's start with the basics. Much the same as with any accident, if you walk out to your car and you see that someone has hit it, you want to treat it like a car accident scene and do the same as you would in any other car accident.

  1. Start by looking for the other driver. In some cases the other driver stuck around and waited for you to come out, in other cases they left a note in which case you might have the information you need to reach out to them or simply call your insurance provider and exchange details. In the worst of situations, they are nowhere to be found.
  2. Whether you found the culprit or not, take pictures of the scene. It's up to you to find as much evidence as you can in order to get reimbursed by your car insurance company.
  3. Contact the police to file an official police report, something you will need if you choose to submit a claim with your insurance provider and something you will need to verify that you were in fact not the one at fault.
  4. Finally, reach out to your insurance provider to let them know what happened.

Am I covered with my car insurance?

If someone hit your parked car, and you have collision coverage or uninsured driver property damage, chances are any damages your car sustained will be covered by your policy.

Let’s look at some other situations in more detail.

Let's assume they left a note. 

If the individual who hit your car left a note, hopefully that note contains their contact information and their insurance information. If they don't provide their insurance information, you need to contact them to get their details. It will also behoove you to look around the area--whether it's a parking lot or street--and see if anyone nearby happened to see what transpired.

There are a few different reasons why your insurance might go up. One of them is filing small claims. If you file small claims regularly, it can result in higher premiums. So, if your vehicle is involved in a hit-and-run while you were in the grocery store or you drove down the highway and a rock hit your windshield, you can choose to report these things and file claims to get the reimbursement or you can simply cover the limited cost out of pocket and avoid filing a small claim.

The reason it might be in your best interest to avoid filing a small claim is that, again, the more often you file small claims, the more of a financial risk you are considered, and the higher the likelihood that your premiums will increase. If you evaluate the damage your parked car sustained and it's something you can afford no matter how inconvenient, choosing not to file a claim can help reduce the chances of your insurance going up. This is entirely up to you.

If the damages are severe, and it's larger than your deductible, it will obviously be better for you to have your insurance step in and cover the costs. 

Also, if the other person left a note or they stuck around, it's going to reduce the chances that your car insurance will go up because you can file with the other driver’s insurance.

Let's assume it was a hit and run.

If there was no note, the first thing you want to do is check the area for any businesses that might have security cameras or any witnesses. Once you call the police to file a report, they can obviously help in the attempt to acquire evidence. It is very rare that a security camera in front of a grocery store or an office park will provide clear enough footage to get information like a license plate but it might go a long way toward helping narrow down the make, model, and color of the vehicle.

The same steps need to be followed wherein you take pictures of any evidence and you document all the damage to your car, even minor paint scratches. In this situation, obviously you may not be able to pinpoint the culprit and if you have uninsured motorist property damage coverage, you can use that to offset the costs if you file a claim with your insurance provider.

But in this case the same principle applies: your car insurance can go up if you file multiple minor claims resulting from a hit and run, so consider your claims history before you dial your insurance provider.

The Mitigating Factors

The other reason your car insurance might go up is simply reporting that you were involved in an accident. The more accidents you have, the worse it reflects on your record, and the higher your premiums will be.

In the event that your parked car was hit, your insurance company will likely view it as an accident where you were not at fault. Whether or not they increase your rate is contingent upon the state in which you live and what your state policy is. It will also go up based on the internal guidelines for your insurance company. Realistically your insurance company is the only one who can tell you what their internal policies are for parked car collisions.

However, the biggest factor influencing whether or not your rates go up regardless of your being at fault, is whether you have a history of filing a lot of claims. If you recently filed two or three claims in the last few months, that could hurt you.

But if the accident was not your fault, the likelihood of your insurance rates going up is limited. Certain insurance providers will charge you for any accident over a certain monetary amount regardless of who was at fault, although these are typically programs designed for high-risk drivers. By comparison other insurance companies will make a determination based on who was at fault, and whether the person at fault was ticketed in the accident.

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