Comprehensive versus liability: auto insurance and fear of medical bankruptcy

[onemorebike]

Reviewing our auto policy which has been liability only for a long time. I took the mustachian stance of having enough money for a replacement car if needed and not paying extra for full coverage. Then I started imagining a serious crash and wondered how medical expenses would pan out.

My liability only covers 20k, does anyone know if that is adequate for most crashes? We have excellent health insurance through my work and it is unclear how those two work together in the instance me or my family is seriously injured. Fear and uncertainty is pushing me towards comprehensive but that is not a fact driven decision and I'm wondering what the mustachian minded folks have to say.

As always, I value your input,

Onemorebike

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[Metalcat]

Can you explain more about your liability only covering 20K?
What does that 20K cover?

My liability is 2M, and the minimum here is 1M, so I'm confused.

[onemorebike]

Can you explain more about your liability only covering 20K?
What does that 20K cover?

My liability is 2M, and the minimum here is 1M, so I'm confused.

Ah shoot, I can see how that wasn't clear. My liability only covers 20k in crash related  healthcare expenses, according to my agent.

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[researcher1]

I took the mustachian stance of having enough money for a replacement car if needed and not paying extra for full coverage. Then I started imagining a serious crash and wondered how medical expenses would pan out.

My liability only covers 20k, does anyone know if that is adequate for most crashes? We have excellent health insurance through my work and it is unclear how those two work together in the instance me or my family is seriously injured. Fear and uncertainty is pushing me towards comprehensive but that is not a fact driven decision and I'm wondering what the mustachian minded folks have to say.

How much does your current liability insurance cost you?

I pay only $450 per YEAR for FULL coverage on TWO nearly new vehicles.

I don't know how much extra I'm paying for full coverage, but it is worth it to me.

[Metalcat]

Can you explain more about your liability only covering 20K?
What does that 20K cover?

My liability is 2M, and the minimum here is 1M, so I'm confused.

Ah shoot, I can see how that wasn't clear. My liability only covers 20k in crash related  healthcare expenses, according to my agent.

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For the other person?
Because if that's the case, I wouldn't feel comfortable driving with only 20K healthcare coverage in case I injured someone.
ETA: and I live in Canada.

Your issue may not be about comprehensive, it may be about not having nearly enough liability coverage.

[onemorebike]

I took the mustachian stance of having enough money for a replacement car if needed and not paying extra for full coverage. Then I started imagining a serious crash and wondered how medical expenses would pan out.

My liability only covers 20k, does anyone know if that is adequate for most crashes? We have excellent health insurance through my work and it is unclear how those two work together in the instance me or my family is seriously injured. Fear and uncertainty is pushing me towards comprehensive but that is not a fact driven decision and I'm wondering what the mustachian minded folks have to say.

How much does your current liability insurance cost you?

I pay only $450 per YEAR for FULL coverage on TWO nearly new vehicles.

I don't know how much extra I'm paying for full coverage, but it is worth it to me.

$450 for two cars and comprehensive is a great deal! I have a solid driving record, one car and I'm paying ~500 for liability only. Quotes for full coverage are something. Like 3-500 more a year.

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[Sibley]

Auto insurance costs are highly variable by location, vehicles, the people, etc. You can't compare - it's apples to oranges. If you're trying to compare you need to get a bunch of different quotes.

OP, it sounds like your liability coverage is too low. Comprehensive is fixing the car, not the other person.

[terran]

Yikes! I would want much higher liability coverage, and probably umbrella coverage too. Skipping coverage for your vehicle is fine (and probably recommended for a cheap car), but you're putting your wealth and future earnings at risk if you don't have enough liability coverage to satisfy someone in a lawsuit and incentivize the insurance company to defend you. Personally I'd also want underinsured motorist coverage that would cover you as well if you get it an accident with someone who is similarly underinsured.

[I'm a red panda]

$20K in healthcare coverage seems to be almost nothing.
That won't cover any sort of surgery.  It will only cover a small amount of imaging. (An MRI can run $3-5k)
Even if you have health insurance, it is very likely the health insurance will expect reimbursement from your auto insurance. 

And if that is the coverage for the OTHER person, that is NOTHING.  I was rear ended in a very very minor accident. (I was stopped at a red light, she didn't stop, and hit the car behind me, which hit me. It fractured a bone in my neck.  I did not need surgery, but my medical bills were close to $50k.  My husband got hit by a car riding his bicycle- his medical bills were close to $150k.  He also did not need surgery.)

Liability for an automobile- so many of them cost more than that amount, even used. It seems too low too.

That sounds WAY too low.

[SimpleCycle]

There are a lot of different parts of auto coverage, and they vary a bit by state.  Going to try and round it up, and tagging @Nick_Miller to see if he can weigh in as well.

First there is the liability coverage - this covers damages that YOU cause to OTHERS.  There are two parts - bodily injury liability, and property damage liability.  When there are state minimums for "liability" you are usually talking about bodily injury liability.  This is usually stated like $25k/$50k, which means $25k per person, $50k per accident.  Bodily injury liability is cheap, and important.  We carry $300k/$300k, and then our umbrella policy kicks in above that.  Bodily injury liability coverage does not pay for injuries to you or your passengers in an accident that you caused.

The amount of property damage liability you can carry is usually a separate limit.  We carry $100k and the umbrella kicks in above that.

Second, there is uninsured and underinsured motorist coverage.  This covers damages that OTHERS cause to YOU when they do not have sufficient insurance to cover your damages.  This is what would cover your medical bills in an accident where the other person is at fault but does not have sufficient coverage to pay your medical bills (and lost wages, if relevant).

Third, there are collision and comprehensive coverage, which cover damages to your VEHICLE.  Collision covers crashes, comprehensive covers everything else.  These only cover damage to your vehicle, and have nothing to do with medical payments.

Fourth, there is medical payments coverage, which cover medical payments to you and your passengers regardless of who causes the accident.  This is what kicks in if you have an at fault accident for your own medical costs.  This is in addition to your health insurance, which would pay accident costs as well.  This is likely what you have a $20k limit on.

In general, your own health insurance and that of your passengers is what covers your own and their injuries in the event of an accident where you are the at fault driver.  Medical payments coverage fills any gaps, such as paying your deductible and paying for passengers who have inadequate health insurance.

Hope that clears things up a bit.

Edited to add: this is all true of how it works in a state with fault.  Some states are "no fault" and this all works differently - it's important to know what kind of state you are in.

[Nick_Miller]

Reviewing our auto policy which has been liability only for a long time. I took the mustachian stance of having enough money for a replacement car if needed and not paying extra for full coverage. Then I started imagining a serious crash and wondered how medical expenses would pan out.

My liability only covers 20k, does anyone know if that is adequate for most crashes? We have excellent health insurance through my work and it is unclear how those two work together in the instance me or my family is seriously injured. Fear and uncertainty is pushing me towards comprehensive but that is not a fact driven decision and I'm wondering what the mustachian minded folks have to say.

As always, I value your input,

Onemorebike

Sent from my moto g(6) using Tapatalk

*floats around like a spooky ghost*

I was summoned!

Okay, I deal with this every day (personal injury attorney). But also keep in mind that insurance laws are state specific, and there's a surprising amount of variance. Still, I think a few central concepts cut across all statutory differences.

1) Protecting your assets/finances if YOU negligently cause a wreck and injure people (this includes your passengers) while you're driving.

Answer: Get a TON of liability coverage, for both bodily injury (you hurt them) and property damage (you destroyed their car/property). THIS IS VITAL.  Personally, I have $300K in liability coverage, as an example. If you kill someone, that's enough money for your insurance company to fight and demand a release from the other side in return for settling, which means you'd be protected. You can also explore umbrella policies, which kick in at certain levels after your liability coverage is exhausted.

2) Protecting  your body/earning power if SOMEONE ELSE negligently causes a wreck and injures you.

Answer A: Make sure you have UM and UIM coverages. THIS IS VITAL. This is coverage you buy that essentially acts like there is liability coverage (in the case the person who hit you was uninsured) or like there is extra liability insurance (in the case the person who hit you was underinsured, meaning they had -some- coverage but not nearly enough to compensate you for your injuries).

Answer B: In addition, I suggest that you have med pay/PIP/no-fault coverage to handle at least the first round of accident-related bills (and in the case of no-fault, PIP, some of your lost wages). Your health insurance will kick in afterwards. But this is a smaller deal compared to Answer A.

3) Worrying about medical costs either way

Answer: You can rack up a TON of medical bills obviously whether it's your fault or someone else's. PIP/no-fault/med pay is not designed to protect you from catastrophic losses, just relatively small amounts (think $10K or so).

If you caused the accident, then there's no way for you to recover on a lawsuit, so your health insurance just covers everything like normal, and you have to deal with deductibles and co-pays like normal. If you are in the US, PLEASE have the best health insurance no matter what MMM says. The chance of you being in a bad car accident is a legitimate concern for most all of us!

If you didn't cause the accident, then you might be able to get the at-fault driver's insurance company to reimburse you for your medical expenses, but these cases drag out, and some drivers just don't have much liability coverage anyway, meaning you'd almost certainly have to get your bills paid first through health insurance, and then your health insurance would be paid back out of an eventual settlement. So still, having solid health insurance is vital.

[onemorebike]

Nick,

Your answer was so thorough it took me awhile to find the time to process all you were saying and compare with my current coverage. Based on your description, I think I may have been misunderstanding my coverage. I think I have all the coverage (plus some) that you mentioned below, but wondering if you'd be willing to provide just a little more of your expertise in review. This is what my account tells me (and I think I was looking at my PIP limit initially, not my "liability")

Single Limit Each Acc 500,000
PIP Limit 1 40,000
Uninsured Motorist CSL/BI Ea Acc 500,000
Additional Coverages Vehicle 1
UNCSL Under CSL 500,000
UMPD Unin Mot Prop 10,000
Deductible 0

Reviewing our auto policy which has been liability only for a long time. I took the mustachian stance of having enough money for a replacement car if needed and not paying extra for full coverage. Then I started imagining a serious crash and wondered how medical expenses would pan out.

My liability only covers 20k, does anyone know if that is adequate for most crashes? We have excellent health insurance through my work and it is unclear how those two work together in the instance me or my family is seriously injured. Fear and uncertainty is pushing me towards comprehensive but that is not a fact driven decision and I'm wondering what the mustachian minded folks have to say.

As always, I value your input,

Onemorebike

Sent from my moto g(6) using Tapatalk

*floats around like a spooky ghost*

I was summoned!

Okay, I deal with this every day (personal injury attorney). But also keep in mind that insurance laws are state specific, and there's a surprising amount of variance. Still, I think a few central concepts cut across all statutory differences.

1) Protecting your assets/finances if YOU negligently cause a wreck and injure people (this includes your passengers) while you're driving.

Answer: Get a TON of liability coverage, for both bodily injury (you hurt them) and property damage (you destroyed their car/property). THIS IS VITAL.  Personally, I have $300K in liability coverage, as an example. If you kill someone, that's enough money for your insurance company to fight and demand a release from the other side in return for settling, which means you'd be protected. You can also explore umbrella policies, which kick in at certain levels after your liability coverage is exhausted.

2) Protecting  your body/earning power if SOMEONE ELSE negligently causes a wreck and injures you.

Answer A: Make sure you have UM and UIM coverages. THIS IS VITAL. This is coverage you buy that essentially acts like there is liability coverage (in the case the person who hit you was uninsured) or like there is extra liability insurance (in the case the person who hit you was underinsured, meaning they had -some- coverage but not nearly enough to compensate you for your injuries).

Answer B: In addition, I suggest that you have med pay/PIP/no-fault coverage to handle at least the first round of accident-related bills (and in the case of no-fault, PIP, some of your lost wages). Your health insurance will kick in afterwards. But this is a smaller deal compared to Answer A.

3) Worrying about medical costs either way

Answer: You can rack up a TON of medical bills obviously whether it's your fault or someone else's. PIP/no-fault/med pay is not designed to protect you from catastrophic losses, just relatively small amounts (think $10K or so).

If you caused the accident, then there's no way for you to recover on a lawsuit, so your health insurance just covers everything like normal, and you have to deal with deductibles and co-pays like normal. If you are in the US, PLEASE have the best health insurance no matter what MMM says. The chance of you being in a bad car accident is a legitimate concern for most all of us!

If you didn't cause the accident, then you might be able to get the at-fault driver's insurance company to reimburse you for your medical expenses, but these cases drag out, and some drivers just don't have much liability coverage anyway, meaning you'd almost certainly have to get your bills paid first through health insurance, and then your health insurance would be paid back out of an eventual settlement. So still, having solid health insurance is vital.

[seattlecyclone]

1) Protecting your assets/finances if YOU negligently cause a wreck and injure people (this includes your passengers) while you're driving.

Answer: Get a TON of liability coverage, for both bodily injury (you hurt them) and property damage (you destroyed their car/property). THIS IS VITAL.  Personally, I have $300K in liability coverage, as an example. If you kill someone, that's enough money for your insurance company to fight and demand a release from the other side in return for settling, which means you'd be protected. You can also explore umbrella policies, which kick in at certain levels after your liability coverage is exhausted.

Great advice.

Answer A: Make sure you have UM and UIM coverages. THIS IS VITAL. This is coverage you buy that essentially acts like there is liability coverage (in the case the person who hit you was uninsured) or like there is extra liability insurance (in the case the person who hit you was underinsured, meaning they had -some- coverage but not nearly enough to compensate you for your injuries).

I have a differing opinion here. You should absolutely have insurance that makes sure you'll be okay financially in case of a bad car crash, yes. Buy sufficient disability insurance and health insurance to make sure this is the case. Underinsured motorist coverage guarantees that you'll be paid more if you get hurt in a crash where someone else is at fault than if you get hurt just as badly in a crash where another driver cannot be blamed. Consequently, one or both of the following must be true: you're either underinsured for the "hurting yourself in a crash" case and/or you're overinsured for the "someone else hurts you in a crash" case. Being overinsured is a waste of money. Being underinsured can be a catastrophe. Err on the side of being overinsured, of course, but do this with your general-purpose insurances that will cover you no matter whose fault the crash is. Disability insurance and health insurance are therefore vital. Underinsured motorist coverage...not so much.

[lutorm]

Single Limit Each Acc 500,000
PIP Limit 1 40,000
Uninsured Motorist CSL/BI Ea Acc 500,000
Additional Coverages Vehicle 1
UNCSL Under CSL 500,000
UMPD Unin Mot Prop 10,000
Deductible 0

Yeah so it looks like you have 500k coverage for injury to others, or for you if the other party has no insurance. This should be sufficient to protect you against lawsuits if you cause an accident. For you. you have 40k personal injury coverage. So that essentially means 40k before your heath insurance comes into play.

Seattlecyclone makes a good point, though, that the uninsured coverage if someone else causes the accident is essentially the same as the pip coverage if you cause it. Like, if you can get by with 40k coverage for your injuries if you screw up, why do you need 500k coverage in case someone else screws up? The only difference is whether you can blame yourself or someone else for costing you a bunch of money.

As someone who's been injured by an uninsured driver and attempted, without luck, to recover some of my damages, I found the experience infuriating, and now I'm anal retentive about UM coverage. While it's true that financially the outcome is the same, that's only true if you just give up and accept that the other guy will get away. If you want to try to recover something, it's a lot better for your mental health to have the UM coverage, let your insurance pay you, and then have them go after the other guy. If you caused the accident, you'll just have to blame yourself and there's no way around that...

As for whether you need PIP at all, that seems questionable. The issue is why you would insure yourself against injury while driving but not against injury while doing anything else? It's true that driving is pretty much the most risky activity most people partake in, but there are a lot of other things that can happen to your health. It seems better to just put that money into a better health insurance instead.

[Steeze]

Man - I have all the lowest allowable limits on my coverage- think I probably need to increase my coverage. $25k/$50k liability, property, and uninsured motorist. Probably will increase after this discussion, is about $500/yr Extra to get up to $300k In all the categories.

I was just in an accident the other day, someone hit me, they got 85% liability assigned, I was assigned 15%. They hit the passenger door of my car after rolling a stop sign. My wife was in the passenger seat, I was taking her to a prenatal appointment.

They initially assigned me 100% liability, but I sent them my dash cam footage and they dropped it to 15%. I highly recommend a dash cam. I got the Vantrue N4 and it was worth every penny.

Imagine if they hurt my wife or unborn baby - I would sue them for every penny I could.

Edit: luckily it was low speed and everyone was fine. A couple grand worth of damage and paint probably. Still need to get an estimate.

[slappy]

Nick,

Your answer was so thorough it took me awhile to find the time to process all you were saying and compare with my current coverage. Based on your description, I think I may have been misunderstanding my coverage. I think I have all the coverage (plus some) that you mentioned below, but wondering if you'd be willing to provide just a little more of your expertise in review. This is what my account tells me (and I think I was looking at my PIP limit initially, not my "liability")

Single Limit Each Acc 500,000
PIP Limit 1 40,000
Uninsured Motorist CSL/BI Ea Acc 500,000
Additional Coverages Vehicle 1
UNCSL Under CSL 500,000
UMPD Unin Mot Prop 10,000
Deductible 0

[/quote]

I think everyone else has the nitty gritty covered, but does that say your deductible is $0? If you are looking to save money, you could see what the cost difference would if you increased your deductible.

[Steeze]

At what point do people need umbrella liability insurance? Is there a rule of thumb for that?

Does is cover all types of liability like homeowners or just auto? Will it cover professional liability if I am sued and my company’s policy is not large enough?

Educate me. I come from a long line of people with no assets who don’t believe in insurance.

[seattlecyclone]

As for whether you need PIP at all, that seems questionable. The issue is why you would insure yourself against injury while driving but not against injury while doing anything else? It's true that driving is pretty much the most risky activity most people partake in, but there are a lot of other things that can happen to your health. It seems better to just put that money into a better health insurance instead.

Agreed 100%. If you need to buy insurance to pay your health insurance deductible in a car crash, your health insurance deductible is too high. Fix that problem at the root by getting a better health insurance policy. Buying a separate insurance policy that fixes this problem for just one of the many, many things that could put you in the hospital is not ideal.

At what point do people need umbrella liability insurance? Is there a rule of thumb for that?

I think this makes sense to have whenever you have enough assets that a bankruptcy would set you back a few years. If you crash into someone else and they die, how much is that worth to their family? More than you have, very likely. Sometimes retirement accounts and home equity can have some protections in these cases, but this depends on the state and may not be absolute. Talk to someone educated about your state laws if you're relying on being able to shield your assets from a lawsuit. Otherwise buy some insurance.

Does is cover all types of liability like homeowners or just auto? Will it cover professional liability if I am sued and my company’s policy is not large enough?

Umbrella will sit on top of your home and auto coverages. The policy will often require you to have a certain amount of liability coverage in these underlying insurances, and then it will cover any sums above that up to the policy limit. Not sure about how professional liability interacts with umbrella insurance, if at all.

[Steeze]

What are the premiums like, ball park, for an umbrella policy?

[zoro]

My philosophy on insurance is that it is a bad bet, and only use it where essential. it should only be used to protect against absolute disasters where your net worth is insufficient to cover the hit.
So - no comprehensive insurance - ever - if you cant afford to replace your car with cash on hand you are driving a car that is too expensive for you - sell it and buy a cheaper one.
Maximum liability policy $300k (in most states) - and an umbrella policy on top of that a $10M umbrella can be had for $700 per year - they hardly ever pay out, but most of the people on here have decent net worth - so if you have the unlikely event of rearending  a lexus full of lawyers you will be glad you had it.

PIP seems a waste of time - get good health insurance and use that instead. It is doubly dangerous to have two insurances covering the same thing - as they will both fight with each other to avoid paying you.

[seattlecyclone]

What are the premiums like, ball park, for an umbrella policy?

We pay roughly $200/year for a $2 million policy.