In Part 1, we started discussing automobile insurance to protect your assets from an accident vehicles.  Now we will flip the coin and explore how higher limits on your automobile policy also provides better protection for you and your passengers.

What happens if you or your passengers are seriously injured by someone that has very low insurance limits or no insurance?  Your Bodily Injury coverage does not protect you.  If that is the only coverage you have, you will need to deal only with the other persons insurance company and what they are willing to pay (I’d suggest speaking to a personal injury attorney very quickly, I actually recommend it for any injury accident).

The first coverage that may provide protections for you and your passengers is Medical Payments coverage.  This is an optional coverage that many people do not purchase.  This protects you and your passengers regardless of fault for up to your Medical Payments policy limits (typically they range from $1,000 to $100,000 per person).  There is no need to go through health insurance and your automobile insurance pays for the medical expenses.  This means that if you (or your passengers) are injured in an accident, you can deal with your own insurance company and they will take care of the medical expenses (up to your policy limits).  If the Medical Payments limits are high enough to cover all of the medical expenses and the other (at-fault) party does not have insurance, then your UMBI (Uninsured Motorist Bodily Injury) coverage still has the full limits to provide for pain, suffering, lost wages, etc.

What many people do not realize is that they cannot protect themselves for more than they protect other drivers from their own negligence.  This means that if you only have $25,000 in Bodily Injury Coverage, your Uninsured Motorist Coverage is limited to only $25,000.  However, if you have $1,000,000 in Bodily Injury Coverage, you are able to also have $1,000,000 in Uninsured Motorist Bodily Injury Coverage, protecting you and your passengers up to those limits for someone else being negligent.  This provides coverage for medical bills, pain & suffering, lost wages, and essential services just as if the other person had $1,000,000 in Bodily Injury coverage.

The third type of insurance is disability insurance.  A lifetime disability caused by an accident or illness can quickly and easily drain savings and require you to empty bank accounts or sell homes.  Does the disability require home care?  Are you no longer able to work?  Do you have new and continuing medical expenses?

The last type of insurance is life insurance.  If you have a family that is dependent on you for support, then you should probably have a life insurance policy.  Keep in mind that even if something were to happen to you, their needs continue.  Living expenses, education expenses, medical expenses all continue and a properly established life insurance policy can take care of your loved ones.  The life insurance can pay to your spouse/children, or you can have a trust established that can hold and manage the funds as needed to protect the long-term needs for your loved ones.

In Part 3, we will explore protecting wealth.