By Michael McCartin
No one wants to buy more car insurance than is necessary. Especially when it comes to automobile and general liability coverage, neither is inexpensive. I am often asked "How much coverage should I purchase?" or "What is enough coverage?" I can't specifically answer that question but I can make suggestions and ask some questions that might help you to make a final decision.
A brief and oversimplified explanation of how the car insurance claim process works might be helpful. A common occurrence is an auto accident. The following is an example of what commonly takes place. As a contractor you have purchased a commercial auto policy with a $500,000 limit of liability for both property damage and bodily injury. Your driver hits another vehicle, totals the other car and injures the driver. It is clear that your driver is responsible for the accident. The $500,000 policy limit is the maximum your insurance company has to pay for any and all damages and injuries. The incident is reported to the insurance company, an adjuster evaluates what has happened and based on potential liability sets a reserve; the ultimate amount of money they believe the insurance company will pay on your behalf.
Whether you are responsible for the damage or not, an insurer is obligated to defend you until a verdict is reached or the claimant has released you from future liability. At this point several scenarios can play out. First, you purchased enough coverage, the damages are within the policy limit, a settlement is reached and you and your company are released from any future liability. Second, the damages are beyond policy limits, the insurance company offers policy limits, you have no other assets for the claimant to pursue. The claimant evaluates the situation and determines it is in his best interest to accept the offer and release you.
Third, the damages are beyond policy limits and the claimant does not accept the offer of policy limits made by the insurance company. At this point a settlement must be reached through the judicial system. If a judgment is rendered and it is within policy limits, the insurance company would pay on your behalf and you would not face any future liability. If a judgment is rendered beyond policy limits, the insurance company would pay policy limits and you would be left to defend yourself and possibly pay any amount of monies that remain beyond what the insurance has paid.
Obviously it is imperative to avoid a judgment which awards more than your policy limits. So how much insurance is enough? In order to help answer that question you need to consider the following:
What type of legal entity you are protecting, individual ownership or some type of corporation, keeping in mind that the corporate veil continues to be eroded? What type of work are you doing? Is there a potential for damage to your client's property? What is the value of the properties you are working on? Are they $100,000 homes or $1,000,000 homes? What kinds of disruptions could your employees cause and what would it cost in lost business to your clients? Could you be held liable for that lost business? How many employees do you have? How many vehicles are on the road at any given time? More workers and cars on the road translate into a greater potential for accidents. What do your contracts require as to liability limits? As an individual what is you net worth? What is the corporation worth?. You need enough coverage to insure that a large judgment against you won't wipe out all of your hard earned assets.
Use these questions as a starting point. Then purchase what you can reasonably afford. Proper coverage can be as reasonable as several hundred dollars for twice your current coverage or even and additional million dollars of coverage through an umbrella. If you find yourself asking "How much would that additional coverage have cost me?" my response in most cases is going to be "You don't want to know".
Michael J. McCartin is the President of J.W. McCartin Insurance, a Maryland Car, Homeowners, Business and Life insurance company. Mike is very active in insurance industry trade associations, serving as a past president and board member of the Independent Insurance Agents of Maryland. He has also served on the Agent Advisory Council for Erie Insurance Group. As a result of his diverse industry expertise, he is often sought out as a spokesperson for radio, television, and news stories regarding matters of insurance.
Visit J.W. [http://www.mccartin.com]McCartin Insurance Website.
Article Source: [http://EzineArticles.com/?Car-Insurance---A-Brief-and-Oversimplified-Explanation-of-How-the-Car-Insurance-Claim-Process-Works&id=2225358] Car Insurance - A Brief and Oversimplified Explanation of How the Car Insurance Claim Process Works
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