Do you really know what insurance you need to cover you? Do you know what level of coverage will properly protect you?
What if caused a car accident and the other person sued you? What if another person with no insurance (or too little insurance) caused an accident that injured you? What if your house burned down? What if someone slipped and fell inside your house on that loose floorboard you forgot about?
We are not insurance agents. We are lawyers.
But it is simply good legal advice to make sure our clients are properly protected. We have seen first hand what happens when someone causes (or suffers) an accident and they don’t have enough insurance to cover the losses.
The world we live in simply requires insurance in order to minimize your risk. Whether you like it or not, that is a fact of modern life. Insurance companies like to take your money, and hate to pay it out. But they are a necessary evil, so you have to deal with them.
If you are running around without insurance – or with too little insurance – you are running risks that can jeopardize your finances.
In this post, we will break down each type of insurance we believe everyone should have. And we will give you suggested amounts of coverage. We will also lists some types of insurance you may not need and should reconsider if you have it.
If you have questions about any of this, contact an insurance broker. They are the experts in this stuff. They know the coverages you need and the amounts. Our goal is really to make you aware of this problem so you can fix it if you need to.
How insurance works for you
Insurance covers you for losses and harms you may cause to other people due to an accident. If you don’t have insurance, you are personally on the hook for those losses.
Most people know that. But insurance is actually a lot more than that.
Insurance Limits:The insurance company only pays up to the limits of your coverage. If you don’t have enough insurance, you are on the hook for whatever the excess damages are over and above the limits of your insurance.
That means if someone gets a judgment for $100,000, and you only have $100,000 in coverage, guess who pays the other $50,000? You do!
Legal Defense:If you cause an accident and get sued, the insurance company will provide your legal defense. This a huge benefit in any sort of claim.
What if someone sued you? Without insurance coverage you would have to hire your own attorney to defend yourself. This is true even if their claim was a loser and you were ultimately deemed not liable. You would still have to pay your own attorneys fees. That can run into the thousands of dollars very quickly.
Paying for your legal defense is one of the main reasons to get liability insurance coverage.
Uninsured Drivers:Insurance can also cover YOU if someone else causes damages to you, but they don’t have enough insurance coverage. This is the premise behind uninsured motorist/underinsured motorist coverage. Read more about that below.
Insurance You Need
Car insurance 1 – liability coverage
You must have car insurance in order to drive, so I will assume you have car insurance. But do you have enough car insurance? That is the real question.
If you do not have enough car insurance, and you cause an accident where someone is injured and gets a judgment higher than your insurance limit, you personally have to make up the difference! Did you know that?
Maryland only requires a minimum policy for liability only, covering you with $30,000 for any one injured person, and a total of $60,000 no matter how many are injured. This is known as a 30/60 policy.
That is not enough! The injured person’s medical bills alone will eat that up in a medium sized case! It is not hard to rack up $30,000 in medical bills in this day and age.
The old rule of thumb was to get at least a 100/300 policy (covering you for $100,000 in damages to any one person), but a 250/500 policy is a lot safer and much more reasonable.
At least call your insurer and find out how much it would cost to increase your insurance. You may find it is quite reasonable.
Car insurance 2 – uninsured & underinsured motorist coverage
I bet most people reading this don’t even know what it is. Yet it is vital in a state where anybody can drive around with a mere $30,000 in insurance coverage.
We devoted an entire blog post to this subject. Click here to read all about uninsured motorist/underinsured motorist coverage, why you need it, and how to make sure you have enough.
Car insurance 3 – PIP
PIP stands for Personal Injury Protection. This is an insurance policy available through your own car insurance. It covers you for medical bills and lost wages after a car accident.
PIP is cheap. You must have $2500 worth of it (unless you waive it, which is not a good idea). You can get up to $10,000 worth of it very easily. You should do that.
Read about PIP in our Free Legal Guide to Car Accident Cases in Maryland. Scroll down to the “What is PIP?” section and read all the details there.
If you own a home, the mortgage company forces you to have homeowner’s insurance. So you probably have it.
Much like car insurance, the real question is – do you have enough?
You probably got coverage to protect against a fire or property losses. Would your old policy still do that today?
With home prices continuing to rise, you may find out that the policy you got when you purchased your home no longer covers it. If your house burns down, and your insurance won’t be enough to rebuild or pay off the mortgage, what are you going to do?
Also ask yourself – will you be able to replace the contents of your house if it burns? Do you get the replacement value or just the fair market value of your home’s contents? Get replacement value or you are going to be paying a lot out of your pocket.
What about liability coverage? Are you covered if somebody slips and falls on your property and sues you? What about if your dog bites someone? Your property can cause all sorts of losses to another person, and that person can sue you.
Your homeowners’ insurance usually provides liability coverage as well as property coverage. How much are you covered for? Will it cover you in the event of a major claim? Is it enough to protect your assets?
You should have enough liability coverage to protect your assets. So how much insurance you have depends on what your assets are. Add them up, and make sure your liability coverage is more than that number.
But in any case, we recommend you get at least $500,000 in homeowner’s insurance liability coverage. One dog bite case could run that high if it leaves permanent scars. Having a half million in homeowners’ coverage is not nearly as expensive as you think it is. Call your insurance agent and price that out.
Everything said above about homeowner’s insurance also applies to renter’s insurance. Get enough to cover your property, get replacement value, and get good liability limits too.
Umbrella coverage is the “just in case” coverage of the insurance world. It provides a safety net of insurance for people with significant assets.
If someone sues you in a claim worth more than the limits of your coverage, you will be on your own for the excess amount. You can get an umbrella policy for $1 million and rest comfortably in the knowledge that you would be covered by almost any catastrophic claim.
You will also find that umbrella policies are relatively cheap. This is because they rarely come into play (as they are the last insurance company in line when a lawsuit occurs). You usually get it from your homeowner’s insurance company, and they price it as an add on item.
Do you have children? Or a spouse that relies on your income? If so, you better have life insurance. Your heirs will not be able to live without it. And do you have enough? Will the money replace your income? Will your kids go to college?
At least give this some thought. Try to figure out how much life insurance you would need to keep your family comfortable if you suddenly passed away.
If you think you need more insurance, see an insurance agent. Term life insurance is generally inexpensive, especially if you are relatively young, don’t smoke, and don’t have a chronic disease.
Whole life is the expensive version of life insurance because it is also an investment. It is usually a bad investment. Get insurance for protection, not an investment.
Everyone knows they should buy life insurance in case they die. But did you know it is far more likely that you will become disabled?
And yet few people get disability insurance. If you do not have it, you should seriously consider getting it.
You should get enough to replace your income stream if you were to suddenly be unable to work.
Ask yourself – if I became disabled and could not work, how would my family survive?
This is really a whole topic in and of itself, but suffice it to say you DO need health insurance. I don’t care how healthy or young you are, accidents happen and medical bills are expensive!
Long Term Care Insurance
You should at least look into this and consider it if you are getting older and think you may need long term health care. If you are going to rely on Medicare, you should know that they will require you to spend down all of your assets before they pay anything. With our aging society, everyone should at least consider long term care insurance.
Do you have significant assets to protect? A business? A special situation? There is a lot of insurance available. Perhaps a consultation with an agent can open your eyes to insurance you did not even know you needed. At least give it a few moments thought as to what other types of insurance you may need.
Insurance You Don’t Need
There are also some types of insurance you probably don’t need. At least do some research and reconsider if you have any of these types of insurance:
- Life insurance on a child – you are very unlikely to need this, and it is a bad investment vehicle.
- Rental car insurance – your regular car insurance will usually cover you when renting a car. Check your policy to be sure.
- Extended warranties – consumer groups don’t like these policies and say they are not worth it. But if you need it, it can be nice.
- Credit card insurance – you probably won’t need this.
- Gap insurance for your car loan – this is sort of like an extended warranty. You probably won’t need it, and it is generally frowned upon by consumer groups, but it can be a lifesaver if you do need it.
Conclusion & Next Steps
Again, we are not insurance agents. But we do know that you need insurance to protect you from various legal troubles that can strike out of the blue. At least think about it, and go see an insurance agent if you need to review your policies.
Want to know more? Discover what you need to know about Maryland law. Click here to see our Free Legal Consumer Guides and get answers to your questions today. Know your options. Be informed. Protect yourself.
Need an attorney? Please contact us for a consultation today if you need an experienced lawyer in Waldorf and Lexington Park for your legal case.
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