Liability insurance is the coverage of an auto policy that protects a person in the event of an at-fault accident. When a person has hit another person’s car they are liable under the law to fully rectify and pay for all damages to the person’s property and any medical bills that are directly related to the accident. Insurance is a means that allows the at-fault party to pay for their responsibility to the other person.
Liability insurance amounts are usually listed as 100/300/100. This means that the policy will pay up to $100,000 per person for a total of $300,000 per accident and the policy will pay up to $100,000 for all property damage. The hidden cost of liability insurance is not the cost of carrying such coverage’s but rather the cost to you if your insurance is not enough to pay for the damages to the other party.
Suppose for a moment that a policy has limits of 15/30/10 and there is an accident that totals the car and puts the driver in the hospital for a week. The limits of liability will pay $15,000 per person up to a maximum of $30,000 for the accident. If the person’s hospital bill comes out to be $100,000, the at-fault party will have to come up with the difference from what the insurance policy paid and what is left to satisfy the hospital bill. That leaves $70,000 that you will have to pay out of pocket. In most cases the at-fault party will end up being sued and forced to pay the remainder of the balance. This will destroy their financial status for years to come.
If you’re like everyone else, you’re probably interested in car insurance tips that’ll keep more money in your bank account and less money in the pockets of the insurance company. There are quite a few ways to save on car insurance, but by far the most effective method is through accumulative efforts. In other words, nickel and diming your way to savings. Paying your bill in a single lump at the beginning of the year, instead of making smaller monthly payments, is one way to do it. How so?
- Paying in advance guarantees coverage. If, for whatever reason, unforeseen financial hardship should cause you to miss a monthly insurance payment, you’ll be out of luck with a canceled policy and at extreme risk by driving without insurance.
- Making monthly payments costs you more. Most car insurance companies charge a small processing fee to automatically withdraw payment from your bank account on a monthly basis, making the lump payment option a no-brainer for anyone who wants to save on car insurance.
- Money management becomes easier. If you’re living paycheck to paycheck, it might not be possible for you to make a single large payment for your car insurance—but biting the bullet once could make your money management easier if you don’t have a pesky monthly car insurance bill to pay.
Although paying monthly makes switching auto insurers a bit easier for those living on extremely tight budgets—you won’t have to wait weeks to get a pro-rated refund check if you haven’t already paid far in advance. Choosing the single payment method is the option that’s guaranteed to save you money on your car insurance.