When it comes to insurance, most people think they have enough, but the truth is, you might need more. A lot more. The amount of insurance you need depends on your household’s specific financial needs. If you are the breadwinner of a family of five, your cashflow needs are different than if you are a college student living with your parents. Let’s break it down:
Mortgage Payments
Do you have a hefty mortgage payment each month? If so, you need to ensure that you have sufficient insurance to cover this major financial obligation in case of an unexpected event. Imagine losing your primary source of income and still having to make those monthly payments. Without adequate coverage, you could risk losing your home. If you don’t have substantial savings, consider short term disability insurance. Also make sure you have medical payments coverage, which is available in Virginia, which can replace your lost wages.
Childcare Expenses
Kids in daycare? Childcare costs can be staggering. If you’re a parent with young children, you need to factor in these expenses when considering your insurance coverage. Should something happen to you, would there be enough funds to continue paying for daycare? This is especially crucial for dual-income families where both parents contribute to the household income.
Financial Contribution to the Family
Are you a significant financial contributor to your family? Whether you bring home 50% of the income or more, your earnings are likely essential to maintaining your family’s lifestyle. Your insurance should reflect the value of your financial contribution to ensure that your family doesn’t face financial hardship in your absence. Your Virginia auto insurance policy can provide coverage for lost wages if you are unable to work after a car accident.
Stay-at-Home Parents
Stay-at-home parents might not earn a paycheck, but their contributions are invaluable. From physically caring for babies and toddlers to chauffeuring kids to activities, plus managing household chores, replacing a stay-at-home parent’s role would be costly. When considering insurance, don’t overlook the economic value of a stay-at-home parent’s contributions. The cost of hiring help for childcare, cleaning, cooking, and other household tasks can add up quickly.
Future Financial Goals
What are your future financial goals? Do you plan to send your kids to college, save for retirement, or pay off debts? Your insurance should align with these goals. Adequate coverage can provide a safety net that ensures your family’s financial plans stay on track, even if the unexpected happens.
Health and Medical Expenses
Healthcare costs are another significant consideration. In the event of an accident or illness, medical bills can quickly accumulate. Comprehensive insurance can help cover these expenses, reducing the financial burden on your family. There is no substitute for medical insurance, but medical payments coverage provides no-fault reimbursement for out of pocket costs.
Lifestyle Maintenance
Consider the lifestyle you and your family are accustomed to. Adequate insurance coverage ensures that this lifestyle can be maintained. From monthly bills and groceries to extracurricular activities and vacations, your insurance should account for all these aspects to prevent a sudden drop in your family’s standard of living.
Long-Term Care Needs
As we age, the likelihood of needing long-term care increases. Insurance can help cover the costs of nursing homes, assisted living facilities, or in-home care services, which can be quite expensive. Planning for these potential needs is a crucial part of comprehensive insurance coverage.
The amount of insurance you need is influenced by multiple factors unique to your situation. Assessing your mortgage, childcare costs, financial contribution, and the myriad responsibilities of a stay-at-home parent, along with future goals and lifestyle needs, will help you determine the right amount of coverage. Remember, it’s better to have more insurance than not enough, ensuring that your family is protected no matter what life throws your way.
A Personal Story: The Consequences of Being Underinsured
I’m here to share a cautionary tale about my client, who we call Jack. Jack is a responsible, married, father of two. He coaches his daughter’s basketball team. He’s employed by the Federal government in IT and owns townhouse in Fairfax. He has insurance, but unfortunately, only the minimum amount required by Virginia law. This story highlights the pitfalls of being underinsured and the potentially devastating financial and emotional consequences.
Jack's Hypothetical Accident
Jack was T-boned by a driver running a red light. Airbags deployed but he still hit his head hard. He saw stars but didn’t lose consciousness. He thought he was okay, but that night had a splitting headache and his wife drove him to the emergency room. The doctors performed a CT scan and diagnosed him with a concussion before sending him home. When he woke up the next morning, he couldn’t turn his head and could barely move his left shoulder. His head was pounding. He felt terrible and called in sick to work. He had 7 days of PTO in the bank.
The Ongoing Struggle
Jack was feeling a little better a week later, but he was still waiting for his first physical therapy appointment to deal with his neck and shoulder. His headache was a little better but after an hour on a screen, it got bad enough he couldn’t work. He filed for FMLA, which protected his job, but it meant he went unpaid. Two weeks later he was able to return to work, but only 30 hours a week, and he felt horrible when he got home and was sleeping 12 hours a day. Between sleep, work, and physical therapy, he was useless with the kids and his wife had to pick up all the slack. Basketball was out of the question. Finances at home were tight and he and his wife were really stressed as savings depleted.
Jack turned a corner about a month after the accident. He was back to work full time, but was still going to therapy twice a week. Health insurance paid most of his bills, but the deductibles and co-pays were a heavy burden. He spent three months in physical therapy, but 9 months later, still has low-level headaches on a daily basis and basketball practice is harder than it used to be.
Jack ended up with about $18,000 in medical bills and $12,000 in lost wages.
The Hidden Costs of Pain and Suffering
While the financial costs were substantial, the hidden costs of Jack's pain and suffering were even more significant. The first month was flat out terrible and he could barely function. The months that followed were a long, painful slog. Worse than the physical pain was the stress. He felt guilty going to physical therapy and spending money on co-pays. The savings account was nearly empty, and his wife’s nerves were frayed handling the kids by herself. He was short tempered, which lead to them bickering.
The Emotional and Social Impact
Jack’s social life took a hit as well. He and his wife were grouchy and stressed so barely left the house. The kids were missing sports and his wife was busy doing all the household chores alone and so life outside the house stopped. Hobbies, extended family, church, exercise – all gone.
The Financial Toll
When we look at Jack’s financial situation, it’s clear that the minimum insurance coverage was woefully inadequate. His medical bills and lost wages were $30,000. He also suffered serious pain, stress over his injuries, and emotional distress. He dealt with all of this in a stressful house with a wife who was understandably grouchy and kids that couldn’t understand. And 9 months later, he’s still not “back to normal.” If we were to put a monetary value on what he went through it would be substantial. Imagine what Jack went through – how much would you need to be compensated to go through that voluntarily?
The Harsh Reality of Minimum Insurance Coverage
Here’s where the real problem lies. The driver who hit Jack was uninsured. Unfortunately, Jack had the minimum coverage allowed in Virginia, which is $30,000. He had no medical payments coverage. As a Federal employee, he was required to reimburse his insurance play for a portion of his medical bills. After his medical expenses and covering legal costs, Jack was left with very little. Barely enough to cover his lost wages and out-of-pocket costs. There was nothing left to pay him for the harms and losses to his life. He went through a significant ordeal without adequate compensation for an accident that wasn’t his fault. Luckily, Jack wasn't catastrophically injured, but his experience highlights the severe consequences of being underinsured.
What Could Have Been Different
If Jack had purchased more insurance coverage, specifically $100,000 in uninsured/underinsured motorist coverage, plus $15,000 in “med pay,” his situation would have been vastly different. This type of coverage ensures that no matter how little insurance the at-fault party has, Jack would have up to $100,000 in coverage plus $15,000 in med pay. The med pay would have reimbursed him for lost wages and co-pays within weeks. Next, with the help of a personal injury attorney, his “UM” coverage would most likely be tendered in full. This means the insurance company would be forced to pay $100,000 the full limits of his policy. Jack’s savings account would not have been depleted and his family would have enough money in the bank to help them spark a little joy to recover emotionally from the ordeal – shore up the retirement account and maybe a vacation to make memories with the kids. This is where a personal injury attorney comes into play, fighting to maximize the insurance payout and ensuring that victims receive the compensation they deserve.
Putting a Dollar Value on Pain and Suffering
How do you put a dollar figure on Jack’s pain and suffering? It's challenging but essential for fair compensation. Imagine being in chronic pain for a year—affecting your sleep, work, leisure activities, and mental health. The toll is immense.
Calculating the Value of Pain
Jack's medical bills totaled about $18,000. But the real cost is his daily pain and suffering. What is two weeks in bed being incapacitated worth? $5,000? $10,000? What is 3 weeks of working part-time worth when it means you are working yourself ragged and you have to sleep 12 hours a day and not see your kids? Another $10,000? What about 3 months of working physical therapy appoints into your schedule, eating into your free time. While managing headaches the whole time? $10,000? $20,000? The six months of further recovery, working on a home exercise program and trying to get back into the swing of life? And a body that still isn’t better 9 months later? And might never be better? Adding his medical bills, lost wages, and pain and suffering, Jack's case might easily be valued at $10,000. This reflects his constant discomfort and loss of quality of life. There is no formula to this – a personal injury attorney knows how frame the facts of each person’s case to maximize a recovery.
The Harsh Reality of Minimum Insurance Coverage
The driver who hit Jack had no auto insurance coverage. Jack also had minimum coverage, offering no meaningful protection to his family.
The Importance of Adequate Coverage
Having only the minimum required insurance can leave you severely underprotected. Accidents are unexpected and can bring physical, emotional, and financial hardships. Adequate insurance coverage is essential to safeguard against these events.
If Jack had $100,000 in uninsured/underinsured motorist coverage, his financial situation post-accident would have been vastly different. This coverage bridges the gap when the at-fault party’s insurance is insufficient, ensuring fair compensation for victims.
A Cautionary Tale
Jack’s story highlights the importance of reviewing and understanding your insurance coverage. It's not just about meeting legal minimums; it's about protecting yourself and your loved ones from the full impact of an accident. Ensure you have adequate insurance to cover potential consequences and secure your future.
How Much Insurance Do You Need?
In my professional opinion as a personal injury attorney, no one should have less than $100,000 in insurance coverage. This amount is a good baseline because it covers the most common injuries resulting from typical motor vehicle accidents, which are often non-catastrophic but still significant enough to require substantial medical treatment and compensation for pain and suffering.
Why $100,000?
The $100,000 figure isn't arbitrary. It’s based on the financial realities of dealing with injuries from an accident. Medical expenses can quickly add up, even for non-catastrophic injuries. Hospital visits, physical therapy, and follow-up appointments can be very costly. Additionally, this coverage amount helps compensate for lost wages, pain, and suffering, ensuring you are not financially devastated by an accident.
Why Med Pay?
Med pay coverage is no-fault coverage, which means your out of pocket expense can be quickly reimbursed. If a medical deductible or missed paycheck or two will mean serious financial impacts to your family, we highly suggest med pay coverage to replace at least a month of your wages.
Allyson Family's Insurance Strategy
Let’s talk about Allyson’s family’s insurance strategy to give you a better understanding. She carries even more than the recommended $100,000 coverage because she has a mortgage, three kids, and various financial responsibilities. Living in an expensive area adds another layer of necessity for adequate insurance coverage. She also has 'med pay' coverage to cover out-of-pocket expenses in the event of a serious injury.
Financial Responsibilities
Our financial responsibilities are extensive. From mortgage payments to the daily costs of raising three children, our monthly and yearly income is vital to maintaining our household. We want to ensure that if one of us were unable to work due to an accident, we could still manage these expenses without a drastic change in our lifestyle.
Planning for the Future
We’ve also planned for the future. We want our kids to attend college without the burden of student loans. Adequate insurance coverage ensures that if an accident happens, we can still provide for their education. This is why we've calculated our insurance needs meticulously, ensuring that it aligns with our financial goals and obligations.
Final Thoughts
Don’t be like Jack. Most people do not have enough insurance. Even if you do not have a car, auto insurance will cover you even if you’re walking or biking when hit by a car. Please, take a moment to review your insurance coverage.
The Broader Implications
Insurance isn’t just about meeting legal requirements; it’s about protecting yourself and your family from unexpected financial burdens. Adequate coverage can make the difference between a manageable inconvenience and a life-altering financial crisis.
Take Action
If you're unsure about your coverage, consult with a professional. Schedule a FREE consultation with a personal injury attorney who can walk you through your options and ensure you have the right protection in place.
Review your policy today. Make sure it aligns with your financial responsibilities and future goals. Protect yourself from the full impact of an accident by ensuring you have adequate insurance coverage. Don't wait until it's too late.