This is a true story from one of my son’s friends who went to one of those “name your price” companies and “built his own” policy. Keep in mind that this is a 22 year old young man (we will call him Tim for this blog), not an insurance professional...
Tim is a college student who purchased an inexpensive vehicle to get to school and his job. He called an insurance company and got to work on making his own policy; one that he thought would give him some protection. However, as per the state’s minimum required limits, Tim was only required to purchase $5,000 in Property Damage. This coverage (PD) pays for damage to another person’s property when you, a household member, or another authorized driver causes an accident.
Tim’s story of woe goes like this: Tim was driving from school to his parent’s house and had a single-vehicle accident where his car flipped over, hit a guard rail, and came to rest off the road. Luckily, Tim was wearing his seat belt and was able to walk away from this fairly major crash and did not hurt anybody else. (If he had, I wonder what sort of Optional Bodily Injury limit he had... but that is a blog for another day). The car was totaled, but he did not have Collision so nothing was going to be paid out.
End of story… or so Tim thought.
A couple of weeks later he received a bill from the State of Massachusetts for $10,000 to replace the guard rail. Remember now, Tim only bought the state required limit of $5,000. This story now ends with Tim having to make up the $5,000 difference for the repair/replacement of the guard rail to the state. At this point, he is still not sure if they will accept payments or if he has to come up with the lump sum – either way it is not going to be easy for this college student working on paying his own way. The biggest lesson learned is that when Tim is able to save up and purchase another car, he knows he is going to go through a local, private agent to get real advice.
Another quick point for all of us. Remember what the property damage covers, damage to another person’s property. What if Tim had hit a BMW, or two cars? There are not very many cars out there with a value of less than $5,000. The more coverage here the better.
Here are a couple of scenarios and quotes with changes in the Property Damage limit for a young driver (driving between 3 and 6 years) and with basic coverage (no collision) and $250,000/$500,000 Optional Bodily Injury limits.
Basic quote with $5,000 Property Damage - $906
Quote as above but with $100,000 Property Damage - $980 ($74 more, a significant difference, but Tim would now say worth every penny.)
Quote as above but with $250,000 Property Damage - $987. As you can see, the difference to increase to this amount is so minimal, we would like to see everyone in our office with at least this limit.
If you are not sure what coverages you have or would like a quote for a higher limit, please feel free to get in touch with us, and we would be more than happy to help you with this.