How much Insurance do I need?

Why liability limits matter?

When it comes to car insurance, many people immediately jump to the conclusion that the only thing that they need to worry about is covering their vehicle. The car they use every day is the only valuable asset in their eyes that they need to protect. Yes, your vehicle is an important asset, but what about everything else you own? Your house, boat, collection items, and even your life savings, including retirement money just to say a few. Did you know that all of this is put at risk any time you operate your vehicle.

The reason for this is that you are responsible for any harm or damage you are legally liable for from an AT-FAULT accident. Yes, your vehicle is covered if you have full coverage on it, but what about the other person or the $75,000 car that you smashed into? This is where your bodily injury and property damage liability limits protect you and your assets.


Picture two separate, but
real life scenarios

Example 1:

You rear end and total a brand new $75,000 Mercedes-Benz. Guess who is responsible for the damage to that $75,000 car. You, the person that is AT-FAULT for the accident. If you have the state-minimum in coverage, your insurance policy is not going to fully cover or be able to pay off the total amount of damage caused in this accident.

State minimums vary from state to state. On the low end, for instance is Pennsylvania, which just requires $5000 of property damage. In the case above, if the driver that causes the at-fault accident, (driver A) only has the state minimum, their insurance policy will pay $5000 and the driver is left with a $70,000 judgement against them. Now if the owner of the Mercedes-Benz (driver B) has full coverage on their vehicle, they are protected if they have full coverage by their insurance policy. But do you think that insurance company (of driver B) wants that $70,000 bill? They will seek a suit to get that $70,000 bill from driver B personally, if they have enough personal assets to cover some or all of the difference.

Example 2:

You cause a bad accident that severely injuries a 35 year old surgeon that has 4 kids. Due to this accident, this surgeon can no longer perform the same duties and can not work any longer. Can you imagine how much this claim could be worth?

Now imagine if you have the state minimum for bodily injury of say $15,000 per person/$30,000 per accident or $25,000 per person/$50,000 per accident (varies state to state). The insurance company will only pay out as much as your liability limits are. Once they are exhausted, you are at risk.

Sizing up your assets

If you do not have a lot of assets, it is unlikely that a lawyer will file suit. In order for a judgement to be made against a claimant, lawyers do want to make sure their client would be compensated and a claimant’s assets are required for compensation.

If you truly do not have many assets, you COULD be protected enough by the state minimums. We always tell our clients, to purchase as much insurance as they can afford. A review of your assets is important, because you do want to protect what you can’t afford to lose. A 22 year old right out of college may not have many assets. As time goes on and they build their life, 8 years later they have something to protect.

Roughly 90% of accidents will probably fall well within your liability limits. We all think we are invincible and it will never happen to us. The top excuse I get for purchasing low limits is “I’m a safe driver and don’t drive a lot, I’m good”. In a split second the unimaginable can happen. Don’t be left without protecting what you worked years for, to have it taken away from one split second freak accident.

Suggested Liability Limits

We suggest to our clients a minimum of $100,000 per person and $300,000 per accident for bodily injury and $100,000 for property damage. If you have more to protect, most insurance policies can be increased up to $1,000,000 of coverage for each. Still not enough? Umbrella policies can add an extra $1 million plus of coverage.

Think about what you have to lose before you settle on “cheap” insurance. Cheap insurance is never good. Affordable insurance is better.

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