Insurance

There’s nothing good about being in a car accident. Unless you happen to live in a romantic comedy, and manage to meet the love of your life in a cutesy fender-bender, there’s not much positive to say about hitting something with your car, or having another car or inanimate object hit your car.

One of the biggest headaches coming out of an accident: what’s this going to do to my insurance?

We all know that accidents of any kind aren’t good for our insurance premiums. On the one hand it makes sense — if you get into an accident, insurance agencies tend to think that you’re likely to get into another one, which means providing you with insurance is riskier, which means they need to charge you more.

On the other hand, that’s what you have insurance for in the first place. It seems like, for insurance companies, an ideal customer is one who pays a monthly fee and never uses their insurance.

But then you do get into an accident. Repairs are required. And you ask yourself, “Should I let my insurance pay for this?”

Single Car Accident

Let’s say no one else is involved. Only your car has been damaged. A few years ago, in the middle of a snowstorm, I spun out on an exit ramp and cracked up the front, right edge of my vehicle. (I say “cracked” instead of “crumpled” because it was the kind of car that cracked instead of crumpled, unfortunately.) The car was perfectly drivable, it just looked off. I decided to leave it be.

But let’s say you can’t leave it be. It needs to be fixed. Should you use your insurance or pay out of pocket? Well, let’s consider the following:

Your Deductible

Before your insurance company pays for any repairs, you’re going to have to pay a deductible. The amount is usually fixed and generally pretty high if you pay a low premium (conversely, the higher your premium, the lower your deductible — it’s one of the ways that insurance companies manage risk). If the repairs are less than your deductible, pay out of pocket. If they’re slightly higher, you might still want to pay out of pocket.

Your Policy

Not all insurance policies are created equal. It’s difficult to say what an insurance claim will do to your premiums without understanding what your policy looks like. Some policies forgive accidents under a certain dollar amount. Some policies forgive your first accident, whatever the cost. Some consider your full driver history before making a potential rate increase. Speak with your insurance agent to fully understand all of the ramifications of your potential insurance claim.

Your Demographics

In order to control risk, insurance companies make a lot educated assumptions about drivers. Your demographics – your gender, your age, your education level, your credit score — all factor into your insurance policy.

Historical data shows that women are less likely to be involved in accidents than men, so their insurance rates are lower. Young drivers and seniors pay higher rates than middle-aged drivers. A poor credit rating can also net you a higher monthly premium. So when considering whether or not to file a claim, consider your driving record and your demographics. If you’re a highly desirable customer, your insurance company is less likely to raise your rates for fear of losing you to another insurance agent.

Multiple Car Accident

So now let’s say you get into an accident with another car, and the other driver says, “Let’s not bring the insurance companies into this.” They want to work something out directly. If you’re at fault, they want you to give them cash for the repairs. If they’re at fault, they promise to pay your costs out-of-pocket.

Unless you’re dealing with a friend or a family member, the safest way to handle any accident is to let the insurance companies work it out. It’s not necessarily that you should never trust strangers, but you’re going to have a very hard time finding a happy compromise.

If you’re paying for their repairs, you’re going to want a say in who does those repairs. Your interest will be in limiting costs — their interest will be in getting the best possible service, independent of cost.

Also, just because you pay for someone’s repairs out-of-pocket doesn’t necessarily mean they won’t still go ahead and file an insurance claim anyway.

So stay out of that particular quagmire. Let your insurance company sort it out.

After all, that’s what you’re paying them for.

Understanding Coverage Limits

Coverage limits protect your assets and represent the amount of money your insurance will pay to cover losses after an at-fault accident (an accident that you're responsible for). If costs from an accident go above the limits you choose, you're typically responsible for paying them.

So why doesn't everyone just get high coverage limits? Well, while choosing higher limits does give you more protection, it's usually more expensive, because you're asking your insurance provider to cover more damages. So, if you pick higher coverage limits, and you're at fault in an accident, your insurance provider would pay for more damages, but you'd pay more in premiums for that coverage.

Alternatively, choosing lower coverage limits may save you money on your premiums, but you have to assume a larger financial responsibility if you're found at-fault in an accident, and that can be very expensive.

It sounds like a balancing act, but if you follow these rules, you'll confidently find coverage limits that fit your lifestyle and budget comfortably:

Rule #1: Choose Coverage Limits That Reflect Your Needs

When you're deciding on coverage limits, ask yourself:

• Who am I covering on my policy?
  Who you cover under your policy can have a big impact on the limits you need. For example, if you're covering yourself, your spouse and your two teenagers, you may want to consider higher limits, since the risk of being involved in an accident tends to increase as more drivers are added to a policy. You may also have more assets to cover with a larger family. However, if it's just yourself on the policy, take into account your personal needs and choose coverage limits you're comfortable with.

Rule #2: Choose Coverage Limits That Protect You and Your Property

When you decide on coverage limits, you want enough coverage to protect you and your assets if you cause an accident. Choosing limits that are too high may be out of your budget, but limits that are too low can expose you to serious financial risks. So ask yourself:

• What financial assets do I have?
  Without sufficient coverage, you can put yourself in real financial danger! For example, if you're found at fault for an accident but don't have enough coverage to pay for the damages, the other party can legally go after your savings and your property to recoup money. So you should consider your financial picture, your budget, and the value of your assets to choose the coverage limits that can best protect you.

Rule #3: Choose Coverage Limits That You Can Comfortably Afford

Budgeting is important for every union worker. So before choosing your coverage limits, ask yourself:

• Is this limit in my budget?
  Everyone's financial situation is different, and everyone budgets differently. So it's important to make sure you can comfortably afford to pay for your auto insurance, and know how much you could afford to pay out of pocket if you got into an accident.
• Can I pay my premiums with this limit and still cover all my monthly expenses?
  Having proper coverage shouldn't keep you from paying bills, making car payments or keeping a little money every month for "just in case" moments. Thankfully, as a union member you get access to great insurance discounts from Union Plus Auto Insurance.

Rule #4: Update Your Coverage Limits When Life Changes

Life can change quickly, so when it does, make sure your auto insurance is still sufficient to cover you, your loved ones, and your assets.

Recently get married? Add a new teen driver to your policy? Get a new car? Move to a new area? All of these life changes can affect your budget, your property values, your risk levels, and your needs. So after a big life change, make sure to contact your insurance provider to reassess and update your coverage limits.

Now that you've seen the rules for choosing coverage limits, see how much you can save with great coverage and special union discounts with a quote from Union Plus Auto Insurance.