Minimum Insurance Leaves You Vulnerable

You’ve no doubt seen the commercials on TV for car insurance companies promising to “keep you legal for less.” In this economy, any chance to save is appealing. But as we get on the road for the holidays, it’s worth asking what exactly is “legal,” and is just “legal” enough? An insurance policy is really just a contract. In essence, the insurance company promises that if you pay money for premiums, it will provide you with coverage in the event of an auto accident. However, in South Carolina, like in most states, the law requires that the insurance company provide a certain minimum amount of coverage in the contract. These requirements aren’t in place because the legislature doesn’t like insurance companies, they’re there so that you know that when somebody runs into you, his insurance can cover at least some amount of any damage to you or your car.

South Carolina law requires a minimum of “25/50/25 coverage. That means that in the event of an auto accident, the insurance company must provide $25,000 worth of coverage for bodily injuries to any single person and $25,000 for damage to property. The “50 in that number means that the insurance company will provide no more than $50,000 for bodily injuries from the wreck, no matter how many people are injured. When you buy a policy that keeps you “legal,” this is what you get.

But is legal enough? Say you’re at fault in a collision with a guy who’s driving a new BMW X5, made right down the road in Greer, which costs $45,000. Since your coverage is only $25,000, you could already personally owe $20,000. Worse, the other driver is injured. With healthcare costs today, any serious injury can result in bills well over your $25,000 coverage for injury to one person, so you’re further at risk.

But you only pay out if you’re at fault, so if you just drive safely you won’t have to worry, right? Wrong. Keep in mind that, in spite of the legal requirement, you might want to purchase underinsured motorist coverage.

Everyone is looking to cut costs these days find yourself in an accident with a driver who doesn’t have insurance. In this situation, South Carolina law provides you some protection and essentially requires your carrier to act like it’s the other driver’s carrier. Your insurance company must provide a minimum of $25,000 in coverage for bodily injuries to any single person and $50,000 total if there are injuries to more than one person. You also have a minimum of $10,000 in coverage for any damage to your car. Often, that isn’t enough coverage and if you’re driving the BMW in our example above, it’s not. Everyone is looking to cut costs these days, but drivers should recognize the trade-offs that come with lower premiums. While minimum coverage can keep you “legal” it leaves you vulnerable to serious financial risk. A higher premium will provide more protection for your personal assets and some peace of mind on those holiday road trips.