State Farm Auto Insurance Practice Test

What could be a consequence of not having adequate insurance coverage?

1. Receiving a discount on premiums

2. Facing financial liabilities beyond insurance limits

3. Being eligible for a lower deductible

4. Garnished wages for non-accidents

The correct answer is: Facing financial liabilities beyond insurance limits

Not having adequate insurance coverage can lead to facing financial liabilities beyond the limits that your insurance policy provides. In the event of an accident or loss, if the costs exceed your policy limits, you would be personally responsible for paying the difference. This additional financial burden can result from medical expenses, vehicle repairs, or legal fees, which can be substantial. Having insufficient coverage means that when you need to rely on your insurance, it might not be enough to cover all expenses, leaving you with significant out-of-pocket costs. This scenario emphasizes the importance of choosing the right coverage limits based on personal circumstances, potential risks, and the value of the assets you want to protect, ensuring you're financially safeguarded against potentially devastating events.