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How Insurance Works When You Hit An Expensive Car

How The Car In Front Of You May Bankrupt You

The other day, while running an errand, I pulled in behind a woman driving a Bentley Convertible. This got me thinking, “Could I afford to hit that car?” What if it totaled it? Here in the DFW Metroplex, it’s not uncommon to see expensive sports and luxury cars where a damaged wheel can cost as much as a new car. How would my insurance handle a claim totaling a high-end sports car or a luxury car?

I have insurance. In fact, I have really good insurance.

When you buy auto insurance, you are purchasing protection for yourself and your vehicle. You can also buy several different levels of insurance. As of 2013, Texas requires by law that every driver maintain limits of at least $30,000 bodily injury per person, $60,000 bodily injury per accident and $25, 000 property damage per accident. Your states will likely vary but here’s a list of minimum auto insurance limits by state that you can reference.

What do these limits mean? Using the minimum limits as an example, the insurance company will pay up to $30,000 for one injured person’s medical bills, $60,000 for a combination of people’s medical bills, and $25,000 for any damaged property. If two people are injured in an accident, and you are found to be at fault, the insurance will only pay up to $60,000 total for their injuries. If the medical bills for the injured parties totaled $70,000, you will not have coverage for $10,000 of the bills. You would be expected to personally pay this amount. Bottom line, if you are involved in an accident in which you are determined to be at fault, any damages beyond your insurance limit is on you.

At CoVerica, in order to ensure our clients have adequate protection, we do not sell limits below 100/300/100. This is the policy limits that I have and this is also what we will use for the example below.

If I were to run into this Bentley while talking on my cell phone (I drive a heavy, full-sized pickup truck) and push her out into traffic where the side of her car is hit by a passing utility truck, this is how this hypothetical situation might play out for me and my family.

insurance-limits-explained

Don’t worry, we were at a complete stop and my car was placed in Park to take this picture.

Brand new, this car costs $212,000. Insurance replaces a vehicle’s value with “like kind and quality.” This Bentley is worth $188,000, based on what this car might be worth used or can be replaced with. She also has to take a trip to the hospital which racks up another $40,000 bill for her treatment. After a long and expensive court battle, the entire thing is ruled my fault for pushing her into traffic. Guess what, since I was at fault, I’m also responsible for the damage to the utility truck. Fortunately, in this hypothetical scenario, neither the driver or the passenger of the utility truck were injured, but the truck was damaged. That’s another $16,000 of damages as the business had to rent a truck for 3 weeks so they can continue their scheduled work.

The Bentley and the Truck together represent $204,000 in property damages. The driver of the Bentley has a $40,000 bill from the hospital, plus the court costs and lawyer fees I owe. My insurance pays the first $100,000 for the Bentley (the limit for one single item is met). They do not cover the Utility Truck damages of $16,000 at all as the first 100,000 of the Bentley ate up my coverage. They do pay her entire medical bill of $40,000 as it falls under the $100,000 medical limit and fortunately, no one else was injured. Total out of pocket for the insurance company is $140,000. I get a bill for the remaining $104,000 for the amount still due to the owner of the Bentley and the Utility Truck. My insurance may or may not cover the legal fees I’ve incurred. I can either pay this amount if I have the money, or I have to file for bankruptcy protection to have my assets liquidated to pay my debts.

So how do we keep this from happening? The easiest way is to increase your protection is by raising the limits of liability for your auto policy. If you’re covered with a 30/60/25 policy, PLEASE update your limits to a higher value as you’ll be on the hook for damage after totaling a new Honda Accord which is much more likely to happen. On average it costs maybe $40-50 a year in additional premium to get to 100/300/100 or go a step further and get limits of 250/500/250. We even have some customers with 500/1mil/500 limits in case you ever find yourself slamming into a Ferrari.

The other way to protect yourself is to add an additional policy called an Umbrella policy. These policies act as insurance for your insurance policy by extending your coverage liability limits across all of your policies. (Home, auto, boat, etc.) A basic umbrella can be added for $200-300 in most cases and I’m adding one to my policy soon.

Here’s a video of a car hitting a $400,000 Lamborghini Aventador which caused the vehicle to split in half (Lamborghini touts this as a safety feature but it essentially totals the car upon an impact). This kind of thing DOES happen.

Stay safe out there, but look around and ask yourself, based on my current insurance coverage, can I afford to damage some of the cars around me on my commute? I know for me personally, it’s not uncommon to see several $100,000+ cars on the road each day during my commute to CoVerica.

What expensive auto claims have you heard of? Let us know in the comment section below.