Why Car Insurance is So Important to Your Financial Well Being

by: Thomas Ajava

Many states now require that you buy a certain amount of car insurance if you're going to drive. Because of this, many people don't realize why it is so important to buy car insurance. Yes, there is a reason other than taking your money! The reason has to do with protecting yourself from potential liability.

If you're an adult, you well know that there a lot of attorneys in this country. From lawsuits over coffee at McDonald's being too hot to the bizarre wording you see on products like hair dryers that tell you not to put the hair dryer in the bathtub, we live in a society that is perpetually in fear of being sued. Well, guess what the number one risk is in your life for being sued? It isn't throwing the hair dryer in the bathtub! It is not serving food or beverages that are far too hot! The single biggest risk that you face for getting sued arises from driving a car.

Car accidents are a normal part of our society. Nearly every one of us drive. With literally hundreds of millions of cars on the road, it's inevitable that there are going to be accidents. Such is life, but the question becomes who is going to be considered at fault in the accident? This is a huge issue because fault necessarily leads to damages. What are damages? Damages are the monetary that must be paid in recognition of your responsibility. Let's take a closer look.

Let's say that you run a red light and hit somebody. They end up breaking their shoulder and are hospitalized for five days. You are clearly at fault and admit it. So what are the damages? Well, the first form of damage is going to be their medical bills. The second form of damages is going to be the cost of the repair of their car. The third form of damages is going to be their pain and suffering from the accident. The fourth form of damages is going to be the lost wages from the five days they stayed in hospital instead of going to work. This fourth form of damages may be even bigger if they can't go to work after leaving the hospital for a certain period of time.

So what are the monetary numbers that attach to these damages? Well, it is difficult to guess at. In general, you might expect $50,000 in medical bills and another $50,000 in pain and suffering. We might also assign $2,000 in lost wages. We might estimate another $10,000 for the repair of the car. I would consider this a fairly conservative estimate. Still, they total $112,000. So, how much insurance you have? If you're like most Americans, you have $15,000 per accident. Put another way, you're about $98,000 short!

As you can see, car insurance is something that you should not just buy by price. Instead, you should view it as a pivotal part of your financial profile. Life is full of all kinds of risk. A measly 15,000 or $30,000 of coverage is not going to cover you in most car accidents. About 10 times these amounts will do the trick.

By definition, we are all human. We make mistakes. Making mistakes while driving can cause serious damages to others. Make sure you have adequate insurance coverag