Online article by non-lawyer will lead drivers astray: the importance of collision coverage and rental car insurance
There was some really bad insurance advice that made the rounds online yesterday on Yahoo. The article, written by the financial website Investopedia, was “15 Insurance Policies You Don’t Need.” The online article suggests that automobile collision coverage and rental car liability and damage insurance are “not worth insuring against.”
That’s bad advice.
Drivers in Michigan and most other states should almost always purchase collision coverage.
For example, Michigan has a “mini tort” law, under which an auto accident victim is entitled to collect a maximum of $500 from the “at fault” driver who smashes into and totals an accident victim’s car.
So if a driver’s car sustains $20,000 in vehicle damage as a result of a car accident, the “at fault” driver who causes the auto accident will only be responsible for the first $500 in vehicle damage. The remaining $19,500 comes from the innocent vehicle owner who now has to find a way to pay for the rest of the car damage.
That’s where collision coverage comes in. It will cover the vehicle damage costs that exceed the maximum recoverable under Michigan’s “mini tort” law.
I recognize most states do not have Michigan’s mini tort law, but in most states you have the same problem. Do you really want to have to go to the expense of hiring a car accident lawyer to sue the person who wrecked your car – assuming you live in a state that even allows this? Or would you rather pay the extra few dollars – usually less than the price of a movie ticket and a soda – for collision insurance?
Unless the car you are driving is an absolute jalopy, almost everyone would be better served to ignore this bad advice.
Rental car insurance
Here is the answer to the constant question nearly everyone has of whether to purchase the “optional” insurance coverage offered by rental car companies: YES.
Rental car insurance is an additional expense. But if you damage that rental car, or you are involved in a car accident, your own insurance will likely not cover the rental car damage. If that rental car is totaled, you will be sued by the rental car company for the full replacement cost of the vehicle. For the extra $8 to $12 dollars a day, that is an expensive and unnecessary risk you are taking.
It actually gets worse.
What happens if you cause a terrible car accident and injure someone? On the liability side, federal law has capped rental car companies to purchase the bare minimum insurance policy limits. In Michigan, that amount is $20,000.
That minimum bodily injury liability amount will be woefully inadequate to protect you and your assets from a costly liability judgment should you seriously injure someone else driving a rental car.
The best advice, contrary to the Investpedia.com article, is to purchase the extra rental liability coverage with the highest limit the rental car company offers. And always call your own insurance agent to review your own auto insurance policy and see if vehicle damage to a rental car will be covered under your own policy. Many auto insurance policies do not cover vehicle damage to rental cars.
Here’s more information about rental car insurance:
– Steven M. Gursten is recognized as one of the nation’s top accident lawyers. He is president of the Motor Vehicle Trial Lawyers Association and is active in several other legal organizations helping attorneys across the country with auto accident and traumatic brain injury litigation.
– Photo courtesy of Creative Commons, by epSos.de
Related information to protect yourself:
Michigan Auto Law is the largest law firm exclusively handling car accident, truck accident and motorcycle accident cases throughout the entire state. Call (800) 777-0028 for a free consultation with one of our accident lawyers.