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What does 25/50/25 mean?
Have you ever taken the time to really look at your auto policy? When you see the numbers such as 25/50/25 do you really know what they mean? You may have a better grasp on this than some individuals, but we find that most consumers do not fully understand the importance of having proper coverage. Here is a brief description about how the auto policy works.
Auto Basics.
Each state has different amounts of liability insurance coverage that a person must carry in order to stay compliant with state laws. The example numbers 25/50/25, as shown in an auto policy, would represent limits of liability that the insured carries. Liability coverage pays for damages that other drivers would incur due to the insured being at fault. This liability coverage would cover the insured against financial loss due to bodily injury and property damages that must be paid out on the insured’s behalf. The first number represents up to $25,000 for bodily injury for any one individual; the second number represents up to $50,000 bodily injury for any one accident; and, the third number is up to $25,000 for personal property. Personal property covers the other driver's vehicle, but can also pay for other objects that were damaged in an accident (e.g. trees, fence, home). Limits of liability do not include coverage for the insured, insured’s family or vehicles. It is only covering other drivers due to the insured being at fault. Not having the right amount of liability coverage and being at fault in an accident can be devastating to an individual and their family. It is important to have the right amount of coverage.
A real life example.
An accident occurs and you the insured are at fault. The vehicle you hit was a fairly new luxury sport utility vehicle. Estimated value at time of accident is $45k. In the vehicle were a husband Mr. Jones, wife Mrs. Jones and their new born baby boy. The Jones’ vehicle is deemed a total loss due to frame damage. The husband, wife and son, although not seriously injured, do sustain some injuries and require emergency medical treatment and a three-day stay at the hospital to recuperate. We all know how expensive medical bills can be. While you are receiving medical attention hospitals seem to charge by the minute. The husband and wife each have $15k in medical bills on the services provided to them and $10,000 on the child. Using our example coverage of 25/50/25, does it sound like you “the insured” are carrying enough coverage? Let’s see. None of the medical bills for any one person exceeded $25k and the total for all medical bills is under the $50k limit at $40k. The damage to the vehicle is $45k since it is a total loss and your insurance will only pay up to $25k. So there is a $20k balance on property damage. As far as your insurance company is concerned, they have covered their end. So where does the money needed come from? The Jones family decides to make a case and take you to court to get the money they need to pay off their vehicle. While they are working to get the rest of the money owed to them they also recoup on damages for loss of income for missing weeks of work, pain and suffering for the experience they had, and court costs for having to hire an attorney. When it’s all said and done, the Jones family payout was more than double of what the medical bills and property damage claim was. The difference in liability coverage from one level to the next is usually not as costly as one may think. It could be worth paying a little extra to make sure the right coverage is in place for you and your family.
What is comprehensive and collision?
You have most likely heard of comprehensive and collision. On your auto policy it may look like just two numbers side by side (e.g. 500/500). Comprehensive will cover your vehicle against damages incurred that do not include a collision. Some basic perils include fire, theft, windstorm, hail and flood. Collision will cover in the event there is an accident with another vehicle or object. The “insured” would be responsible for paying the deductible and the insurance company would pay after that. The deductibles can range from as little as $100 all the way up to $2500. The insurance company and state will determine what deductibles and coverages are offered. When the term “full coverage” is used, it usually means the policy includes at least the state minimum liability along with comprehensive and collision deductibles in place. When someone says “full coverage”, it doesn’t constitute any set number on liability limits. Since each state is different, this can mean something different to each insurance agent or company. It’s important to specify exactly what you need.
Optional coverage.
In addition to full coverage, there are optional coverages you can add to tailor your policy to exact needs. "Uninsured/underinsured motorist" is a coverage offered in most states. This will protect you in the untimely event that you are hit by another driver that doesn’t carry enough insurance or doesn’t have any insurance at all. This is basically the same as liability for other drivers (e.g. 25/50/25), but would be paid to you. According to The Insurance Research Council(IRC), an estimated one in six drivers across the U.S., may be driving uninsured in 2010. Carrying "uninsured/underinsured motorist" is another way to help make sure you are protected. Medical coverage and personal injury protection is a widely available and popular coverage. Medical payments would be covered for you or anyone else in your vehicle up to a set amount. Usually, ranges are from $500 to $15,000. Personal injury protection is like medical coverage but it also can cover a portion of lost wages due to an accident as well as medical bills. Towing coverage covers reasonable expenses in the event you need your vehicle towed. Many insurance companies also offer emergency road side assistance as part of their services. While gathering your quotes, ask the agent or representative about this option. Any time your vehicle is in the shop longer than a day, a rental car may be in order. Rental reimbursement coverage usually ranges from $15 to $40 a day towards a rental. This is an inexpensive option that should be taken advantage of.
Summary.
Most agents and insurance companies have set coverages that they will present to every potential client on the first quote. You may find that some companies will quote you the lowest amount of coverage possible to keep the cost low, hoping you only look at the premium and nothing else. Others may quote you the highest coverage limits available. With this strategy they could be hoping you're overlooking the cost by how much coverage they are offering. You can have too little coverage, but at the same time you can have too much. Probably better to have the latter in a bad situation. Everyone's needs are different. Sometimes having the coverage we need can be costly. Most likely, more than we initially had in mind to spend. QuoteClicker's goal is to be able to assist our customers in getting muliple quotes from the nation's leading insurance providers. This is a service we offer for FREE to our customers in search for insurance. By having multiple quotes, you are able to evaluate all of them and make sure that you are not only getting the proper amount of coverage for you and your family, but also making it affordable at the same time.
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