Auto Insurance Liability Limits

Automobile insurers hardly ever offer infinite coverage. Usually, the schedule specifies the maximum amount they are prepared to pay for each peril. You need to be aware of the constraints and consider if it is acceptable or you want to do something about it. You can increase car insurance liability limits to a more comfortable level but this will raise the premium accordingly.

Auto insurers agree to indemnify anyone who may have a legitimate liability claim against their policyholders. However, there is usually a specified maximum payable limit. Each state determines the lowest amounts that must be purchased. But motorists are advised to choose more comfortable figures to reduce the chance of it being insufficient when it is needed.

Here are the commonly included coverage;

Bodily Injury Liability Limit Per Person: This is the highest amount a carrier is prepared to pay per person in each accident that was your fault.

Bodily Injury Limit Per Accident: This is the maximum compensation for the medical expenses of everyone in each accident you caused.

Property Damage Liability Limit: This is the largest amount a policy will pay for property damages of third parties per incident.

Usually, you see these figures expressed as 25/50/25. This means that the maximum for a single injured person is $25,000, total payout for all the injuries is $50,000 and total property damage is $25,000.

Your policy may include Personal Injury Protection and Uninsured Motorist Coverage as part of the minimum enforced by your state but the explanations are the same for the limits they have.

Usually, state-required basic auto insurance liability coverage isn’t enough to meet today’s expensive medical costs and pay for damages to decent cars. It keeps you legal and nobody can argue with you if you don’t have enough money to pay for a better policy.

However, if you have a home and other assets to protect from lawsuits you should make sure that you buy sufficient protection for claims made against you. Let’s have a look at an example below.

If several people suffer and the first one claims $20,000, the second one $15,000 and the third one $10,000 you will have enough coverage since nobody asked for more than a single coverage limit and the total ($45,000) is still less than the maximum of $50,000. If one person claimed more than $25,000 or the final figure is higher than $50,000 you would have a problem since you are expected to make up the difference out of your own pocket.

In a way, a liability limit set out in your policy schedule is the amount where your vehicle insurer taps out and leaves you alone to deal with the rest.

That is why it is important to buy sufficient liability coverage and most experts advise at least a 100/300/100 breakdown. The higher the better and you may be able to get the extra at a minimal additional premium if you shop around.

You should be comfortable with the provisions of your vehicle insurance and it shouldn’t stretch the budget beyond your means. Generally, carriers are happy to increase the level of protection up to a point. Once that point is passed it becomes really expensive to add more. Then, it is up to the applicant to decide if it is worth the money to go over and beyond.

Furthermore, even a full coverage would have ceilings to be aware of. For example, a company would only pay current market value of an automobile if it was totaled. This could be problematic, especially if you have a large outstanding auto loan to pay off. In such cases, you may need to consider buying GAP.

That is why it is important to have a good look at the provisions in the light of what might happen. Otherwise, you may be too late when you realize after a claim that the car insurance policy isn’t up to the task of meeting all the losses.

It is worth pointing out that underwriters are very generous when you keep adding. The logic is simple. Most accidents are below enforced figures and everyone has it anyway. A chance of a much bigger loss is very low. Hence additional premium cannot be high considering the likelihood is low. So, always get quotes for different levels and see the costs before deciding.