Sadly, we have seen this story over and over again. A car owner is out “shopping around” for automobile insurance and gets quotes from different companies. The insurance agent wants to make a sale so he offers “stripped down” coverage in order to offer a very low premium. The price sounds great to the car owner, so they purchase the “stripped down” insurance. Not long afterwards, the person is in a serious car accident and they discover that their insurance coverage is not very good.

Here are the two main trouble spots to avoid and why you do not want to skimp on the purchase of automobile insurance. First, it is a little bit cheaper to purchase what is called “limited tort” coverage as opposed to “full tort” coverage. However, the small savings is not worth what you give up. When you purchase “limited tort” coverage, you have “limited rights” if you are in an automobile accident, even if it was not your fault. Limited tort customers can only file a claim against the at-fault driver if they suffer a “serious” injury. The insurance company will give you quite a hassle over whether your injury is “serious” and will often refuse to pay anything even though they admit that their driver caused the accident. To avoid this problem, make sure you purchase “full tort” coverage. That way you will have “full rights” and will always be able to file a claim against the other driver if they were at fault for the accident and you suffer any injuries at all.

Here is the second pitfall to avoid. Make sure that you buy enough “under insurance.” Under insurance protects you in case you get hit by someone who has very little insurance. Here is an example. You or a loved one are struck by a drunk driver who causes a death or serious life-long injuries. You have thousands of dollars in medical bills, many surgeries and will never be able to return to work. Unfortunately, the other driver only has $15,000 of liability coverage, the state minimum. Fifteen thousand dollars does not even put a small dent in all of the harm and losses you have suffered. In those situations, you are entitled to collect money from your own “under insurance” coverage that you purchased. As mentioned before, under insurance protects you in the even that you are hurt by someone who is “under insured,” i.e., not carrying nearly enough insurance to cover for serious injury or death.

It is always in your best interest to carry as much under insurance as you are legally permitted to purchase. You are only required to have $15,000 of under insurance, but we always advise people to purchase at least $300,000 of under-insured coverage. It does not cost that much more, and it provides great protection in the event that you or a loved one are hurt by someone who does not have a lot of insurance.

Again, the lesson is simple: Don’t skimp on your insurance!