Photo Credit: Bill Longshaw
Working as an insurance agent for one year taught me that people rarely understand their insurance policies.
And I’ll admit, I used to be one of those people who didn’t really understand insurance either. I completely undervalued the importance of insurance and especially, liability limits.
I’ve now seen first-hand how fast liability limits can be exhausted and the repercussions under insured motorists have had to pay. That’s why I think it’s so important that you understand your insurance policy so that you can choose the right limits for yourself.
Understanding Your Liability Insurance
Liability insurance is meant to protect you in the instance you are in an at fault accident. If you hit another person and damage the person’s vehicle or cause bodily injury your liability insurance would pick up.
The particular state that you live in determines the minimum amount of liability insurance you can have. State minimum liability insurance varies by a huge amount from state to state.
On your insurance policy your liability limits usually look like this 100/300/100.
The first number is bodily injury per person, the second number is bodily injury per accident, and the third number is property damage.
If your insurance policy only has one number for liability insurance it is a combined single limit.
Choosing Auto Insurance Liability Limits
It’s tempting to want to go with state minimum limits because obviously, the lower your liability limits the lower your auto insurance premium will be. But liability insurance is one thing that you do not want to skimp on just save a few bucks.
I live in Ohio and standard limits that my former agency suggests is 100/300/100 but a lot of people want to go with state minimum insurance in order to save money. This is not recommended.
You need to have enough liability insurance to protect all of your assets in case you do find yourself in an at fault accident. The more assets you have the higher your liability limits should be.
Accidents Happen
You might think that $100,000 in property damage is a lot. The reality is that money could be used up quite quickly.
Here’s an example for you.
Driver A is looking at her cell phone and doesn’t see the line of traffic stopped in time. She slams on her brakes but ends up hitting Driver B. Driver B then hits Driver C, Driver C hits Driver D, and so on. Driver A ended up damaging a total of three other vehicles (not including hers.)
Driver A is liable for the damage to every one of these vehicles. It just so happens these are all top of the line cars that are smashed up pretty bad. Poof. The $100,000 property damage limit is exhausted.
It could have been much worse. If there were several passengers in each car and they all sustained injuries Driver A’s bodily injury liability limits could have been used up quickly. Once her insurance limits are exhausted she’s then responsible for forking over money for the rest of the damage she’s caused.
Accidents happen. Sure, you don’t want to think they happen to you, but who does?
When you’re buying auto insurance never skimp on liability insurance just to save a few bucks. It’s better to be safe than sorry.