—- Liability Limits —-
The line of protection you place between a mistake you may make and the guy you have injured who now thinks he deserves to take everything you own!
Your liability limits on your auto insurance look something like this: 15/30/5, or 50/100/25, or 100/300/50. Sometimes they’re listed like this:
$50,000 injury per occurrence
$100,000 injury per accident
$50,000 property damage
However they’re listed, it’s important to understand and periodically review your limits. Auto insurance liability coverage generally pays for the damage you do to another party when the accident is your fault. Consult your policy or your agent for specifics, but “injury” usually applies to things like hospital and doctor bills, lost time from work, pain and suffering, chiropractor and rehab treatment, and any other loss the party has suffered as a result of the accident. Coverage has limitations and exclusions, but it can be fairly broad in it’s application.
The limits define the maximum amount amount of money the company will pay out on your behalf. Here’s how those three numbers play out. The first number is the limit that the company will pay for the injuries to an individual. The second is the limit that the company will pay for the injuries in the entire accident. (remember “injuries” can include all those other things I listed above) The final number is the limit that the company will pay any property damage you do as a result of the accident. This can include the other guy’s car, house, street lamp, store front or whatever you happen to hit.
You can be held liable for the entire dollar amount of damage you caused in the accident whether your insurance pays it all or not. This means that if you wipe out a Mercedes Benz worth $55,000 and you have only a $5,000, $10,000 or $25,000 limit for property damage, you could end up paying the difference out of your own pocket… or out of your future wages if you don’t have enough cash to cover the bill! (Please read that last sentence again!)
I always recommend a minimum of 100/300/100 coverage to my policyholders. I don’t know who is going to wipe somebody out next month. And yes, accidents happen in my agency every week! Most are minor; some are not so minor!
For just a few dollars a month you can increase your coverage from the state minimum of 15/30/5 (in California) to 100/300/100.
In addition to increasing your limits you should also consider a LIABILITY UMBRELLA that will cover you even beyond the limits you select.
Please take just a few minutes this week to review your liability limits. Call your agent, call me, or just at least take a look at what you have. Carrying limits that are too low can put your entire life savings and net worth at risk. It’s not worth saving just a few dollars a month to take that kind of risk!