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Losing Everything Due to Inadequate Auto Liability Coverage

By December 17, 2020Personal Insurance
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Each state sets its own minimum auto liability coverage for drivers. Your state’s goal is to make the required insurance affordable. In many cases the established minimum liability coverage is not adequate to cover the liability costs if you are found to be at fault in a costly accident.

If you are involved in a serious accident, minimal coverage may not get you off the hook for the full extent of damages. Even limits that are several tiers above the minimum may not be adequate for some drivers. Once those limits are exhausted, any remaining damages must be paid out of pocket.

This is important to consider as the cost of automobile claims has been rising rapidly during the past 10 years for a few reasons:

  • More distracted driving has caused in increase in deadly accidents.
  • The cost of medical care to treat injured people has skyrocketed.
  • Modern vehicles have loads of expensive technology, which if damaged, is costly to replace or repair.

Let’s look at your obligations and how to minimize your risk of having to pay for damages that could be covered by higher liability limits.

Consider the following example:

You have an auto policy with a liability limit of $100,000. One afternoon while driving you fail to break properly and you rear-end the car in front of you with very high impact, paralyzing the driver.

Once your limit has been paid by the insurance company, it becomes your obligation to pay for any further damages. In the example above, if the injured party is justified in asking for $3 million, your insurance company would pay the $100,000 for which you are covered, and you would then be expected to pay the remaining $2.9 million.

Alternatively, the injured party could take you to court.  This could easily cost you hundreds of thousands in legal fees in addition to any judgment granted to the plaintiff. Even if you file bankruptcy at that point, if you have assets, you would have to pay what you have and possibly lose everything. Your wages also may be garnished to pay any judgment. 

Inadequate liability, let alone minimum limits set by the state, is not really a solution.

What you can do
  • The smart choice is to opt for an auto policy with higher limits. Premiums in most cases are not significantly higher for higher liability limits.
  • Another option is an umbrella policy.  Available in increments of a million dollars.   An umbrella policy would cover liability for all the vehicles in your household for one low premium.

With such options available, why risk damaging your future because you did not have coverages that would protect you?  

Confused? You can discuss the options with us. We can walk you through options for increasing your auto policy’s liability.  We can help you secure an umbrella policy that would cover your entire household as well as other non-auto related liability claims, such as someone injuring themselves at your home

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