How Much Will You Have to Pay out of Pocket

For the typical driver, one of the first worries that comes to mind after an accident is “How much is this going to cost me?” If you have a solid car insurance policy with sufficient liability protection, you should not be too concerned. Your out-of-pocket expenses after an accident will depend on the size of your deductibles and the amount of bodily injury and property damage liability coverage that your policy offers.

Deductibles

If you suffered injuries or vehicle damage as a result of an accident for which you were at fault, your insurer will be responsible for the loss if you have collision and medical payments coverage. Assuming you have these coverages, your out-of-pocket expenses will be limited to the car insurance deductible you chose. For instance, if you have a $500 deductible on your collision coverage and personal injury protection, your financial responsibility for your vehicle’s damage and your injuries will total $1,000. Drivers who lack these coverages will have to pay for their vehicle’s repairs and/or their injuries on their own.

Liability Protection Limits

In almost all states, it is illegal to drive without liability coverage, so most drivers carry this protection. What can vary considerably, however, is how much liability coverage each driver has. Drivers who opt for the bare minimum of property damage and bodily injury liability protection may end up with significant out-of-pocket expenses following an at-fault accident. In the event of a lawsuit, the injured parties can come after your personal assets if your coverage is insufficient.

In other words, if any gap exists in the damages and injuries you caused and the amount of liability coverage you carry, you will have to pay the difference out of pocket. For example, if you carry 25/50/20 liability protection and cause three people a total of $70,000 in personal injuries, you can be sued for the difference between the damages ($70,000) and your coverage limit ($50,000). In that case, you could face a lawsuit seeking damages of $20,000, in which case your assets would be at stake, including your savings, your home, and your investments.

Weighing Out-of-Pocket Costs against Higher Premiums

When you have an at-fault accident, the last thing you want is exorbitant out-of-pocket costs. The only way to prevent this, however, is to up your liability coverage limits and keep your deductibles at a reasonable level. Doing so might raise your car insurance premiums, but it will also protect you from financial ruin if you cause a serious accident.