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From time to time, I've heard drivers say, "I have full coverage." What does full coverage mean?

Each state has financial responsibility laws that require every driver to have insurance that provides liability coverage for damages the driver may cause; each state sets a state minimum.

In Indiana, for example, minimum coverage required is $25,000 per person/ $50,000 per accident for Bodily Injury and $25,000 for Property Damage. This appears on your policy’s Declarations Page as 25/50/25 Liability limits.

This means that if you’re the at-fault driver in a crash that injures others and knocks out a light pole, your coverage will pay up to $25,000 to fix any damages to the other vehicle, the light pole and any other property you damaged that belongs to others. Additionally, your policy may cover medical-related expenses to others up to $25,000 per person for injuries but not more than $50,000 total for the accident. The minimum coverage here does not protect you or your property.

To give a comparison of how state minimum varies by state, minimum coverage required in Texas is $30,000 per person/ $60,000 per accident/ and $25,000 for Property Damage.

Do you think state minimum coverage is enough to cover you if you cause a crash? Let's look at two scenarios.

Scenario 1
Brent lost control of his vehicle and rear-ended a minivan with a family of five. The mother and her three children are rushed to the hospital by medical helicopter. After surgery and being put on life support for a few weeks, they leave the hospital and go to rehabilitation, physical therapy, a chiropractor, etc. The whole crash cost $50,000 per person and a total sum of $250,000 in Bodily Injury. Brent is now personally responsible for the amount in excess of the insurance he bought when he thought he had full coverage.

Scenario 2
Donna ran a red light while texting and t-boned a brand new $55,000 vehicle, sending the other driver and passengers into a coma. Donna also hit the traffic light causing $45,000 in damage. She thought she had full coverage as her 1-800 agent told her. Now Donna is trying to figure out how she will pay for the bills she incurred for driving with the state minimum liability limits.

Now that you understand there’s no such thing as full coverage, you probably want to know what coverage you can buy to get the total protection you need for yourself and your family. Other coverages that you may want to consider are:

  • Uninsured (UM)/underinsured motorist (UIM) coverageUninsured motorist coverage will reimburse you when an accident is caused by a driver who lacks insurance—or in the case of a hit-and-run. In the case of a serious accident, underinsured motorist coverage will make up the difference between your losses and the coverage limit of the policy held by the driver who causes the accident. (Source I.I.I.)
  • Medical payments/Personal injury projection (PIP) – Coverage that provides reimbursement for medical expenses for injuries to you or your passengers stemming from an accident where you or someone using your car is at fault. This coverage may also pay lost wages and other related expenses. (Source I.I.I.)
  • Comprehensive coverage – Coverage against theft and damage caused by an incident other than a collision, such as fire, vandalism, hail, flood, falling rocks and other events. (Source I.I.I.)
  • Collision coverage – Optional coverage that reimburses you for damage to your car that occurs as a result of a collision with another vehicle or other object—e.g., a tree or guardrail—when you’re at fault. While collision coverage will not reimburse you for mechanical failure or normal wear-and-tear on your car, it will cover damage from potholes or from rolling your car. (Source I.I.I.)
  • Rental reimbursement coverage – Optional coverage that covers a rental replacement car after an accident. (Source I.I.I.)
  • Roadside coverage – Optional coverage that covers towing and roadside assistance costs. (Source I.I.I.)

Each policy will have its own limitation on how much it will pay out. All those big numbers can be confusing. Knowing what each number means will let you know what the policy covers in case of a mishap, if you’re at-fault or if you’re not at fault.

I encourage my clients to increase their limits to enjoy better protection to cover their financial futures. For example, I highly recommend carrying limits of $250,000 per person/ $500,000 per accident/ $100,000 for Property Damage.

I also suggest making sure you cover yourself by carrying Uninsured and Underinsured coverage to match the same limit to protect you and your family from the mishap. The difference in premium to carry this valuable coverage compared to the required minimum is small, and it gives you peace of mind.

Other ways to protect your assets is by obtaining an Umbrella policy, which gives you higher limits of liability when you exhaust your policy limit and have a huge gap in coverage.

Remember, there is no such thing as full coverage.

If you find your Agent is using that term, it's time to re-evaluate your policy and your Agent. Don't buy insurance on price. Instead, look at the coverage and buy it based on the protection you need.

Man Phung owns Brightway, The Phung Agency with locations in Fishers, Ind., and Round Rock, Texas. His primary focus is on Personal Lines of insurance as well as Commercial insurance, which includes restaurants, commercial property, auto repair shops and artisan contractors. For more information, please visit BrightwayPhung.com.

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