We’ve all heard commercials advertising how much you can save on car insurance. However, carrying only the minimum coverages may put you and your finances at risk if you are in a motor vehicle accident, whether it was your fault or not. Knowing the different types of insurance and what they cover can help you determine your coverage needs.
1. The basics of car insurance
Most states, including Montana, have “fault” automobile insurance laws, which means the at-fault driver is legally responsible for the financial consequences of the accident. Liability insurance is intended to cover these damages if you are at fault, i.e., liable, for the wreck.
There are other types of insurance that can also protect you in case of an accident, including the following:
- Uninsured motorist (“UM”) coverage – covers damages if you or your passengers are injured by a hit-and-run or a driver who does not have insurance
- Underinsured motorist (“UIM”) coverage – covers damages if you or your passengers are injured by a driver whose insurance is not enough to cover your damages
- Medical payments (“Med Pay”) coverage – “no fault” insurance that covers only medical costs
- Personal injury protection (PIP) coverage – “no fault” insurance that covers medical costs, lost income, and potentially other losses for you and your passengers
- Umbrella insurance – additional liability coverage that kicks in after you’ve exhausted your other liability policies
2. What are the minimum requirements for car insurance in Montana?
Insurance laws vary from state to state. Montana law requires you to carry $25,000 for bodily injury liability per person, $50,000 for bodily injury liability per accident, and $20,000 for property damage. Your insurance agent is required to provide you with a minimum of $25,000 of uninsured motorist coverage as well, unless you reject it in writing.
3. Why would I need more than the minimum amounts of insurance coverage?
If you are at fault and don’t have enough insurance, you may be personally liable for amounts beyond the insurance coverage. Say you are at fault in a car wreck that caused the other person over $100,000 in damages. If you only have $25,000 in liability coverage, you may have to pay the amount not covered out of your own pocket. Whether you have to pay depends on your assets, which include not only cash on hand but your savings, your property, and money you might earn or inherit in the future. Courts have the power to order you to sell your personal assets or have your wages garnished.
Even if you didn’t cause the accident, you are still at risk. Put yourself in the shoes of the injured driver from the scenario above. Say you were injured in an accident caused by another driver, and both you and the at-fault driver have only the state minimums for liability insurance and underinsured motorist insurance. Between your significant medical expenses, future medical treatment, and lost wages, you’ve suffered more than $100,000 in damages. You will receive only $25,000 from the other driver’s liability insurer and $25,000 from your own insurer for underinsured motorist coverage, leaving you with more than $50,000 in uncompensated losses.
4. How do I know how much insurance I need?
Remember, the purpose of insurance is to protect you in case of an accident, so you need to consider more than your insurance premiums. Saving money in the short term may end up costing you in the long run.
It’s ultimately up to you to decide how much insurance to purchase. It may be helpful to speak with your insurance agent or an attorney to help you identify the factors you should consider.
If you are in an accident, an attorney can help you determine what coverages are available and what you need to do to access them. The attorneys at Edmiston & Colton Law Firm work hard to ensure their clients who have suffered personal injuries are getting the maximum insurance coverage available. For more information, visit www.yellowstonelaw.com or call (406) 259-9986.
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