Personal finance experts recommend that you review your coverage, as it may not be enough in the event of an accident. “Paying more is not fun, but this is a great time to do it.”
Thanks to inflation, you may be paying more for just about everything these days, and your auto insurance is no exception. Insurers have raised their rates by 8.3% on average this year, according to data from S&P Global Market Intelligence, and Bankrate analysts believe costs will continue to rise for consumers.
For insurers, the price increases make sense: the rising cost to pay claims means insurance companies must charge their customers more to stay afloat. But for drivers, it means higher premiums for the same coverage.
Depending on your policy, that could be a big problem, warns Cate Deventer, editor of Bankrate. “Rising costs mean your insurance may not cover as much as it used to,” she said. “Several million people could be underinsured.”
Here’s why insurance experts say your coverage may not be enough and why it’s worth examining your current policy to make sure you won’t have to pay extra out of pocket in the event of an accident.
we alert users to the fact that the auto policy will not provide one hundred percent coverage.
The first step to making sure you have adequate coverage is to understand how your current policy works. “People buy a policy and pay the bill every month without checking to see what they actually have,” Deventer points out.
Your policy may include comprehensive and collision coverage, which cover different types of damage to your vehicle, as well as other coverages that pay your medical bills in the event of an accident.
However, the key coverage to look out for is third-party liability, Deventer says. If you are determined to be at fault in an accident, this covers damage to property and other vehicles, as well as medical expenses for other drivers and any lawsuits you may face.
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In the event of an accident, your insurance will pay up to a maximum amount specified in your policy. If the damage exceeds the amount your insurer covers, you could end up paying the difference.
And the costs associated with auto accident insurance claims are on the rise. The price of motor vehicle parts, for example, rose 13.4 percent last year, according to the Federal Reserve Bank of St. Louis.
Cars have also become more delicate, Deventer explains. “An accident that used to be a dent in the bumper now could be damage to cameras or sensors.”
Then there are the medical bills. In 2020, auto insurers paid an average of $20,235 for bodily injury claims in auto accidents, according to the Insurance Information Institute. But in the past 12 months, the price of medical care has risen 5.6%, according to the Bureau of Labor Statistics.
That’s cause for concern, especially if your auto coverage is the state minimum. A handful of states only require your policy to cover $15,000 or $20,000 in medical expenses per person in the event of an accident, and Floridians aren’t required to buy medical liability coverage at all.
That means even an average medical claim could be thousands of dollars more expensive than what your policy covers, and a particularly costly accident could be financially crippling.