Increased liability limits are an insurance bargain

By Ryan Hurlbert on November 17th, 2010

With few exceptions, the minimum liability limits required by most states are too low to be of any practical value. Come on, California- $5,000 in property damage liability? Really?

When a state sets a minimum level of coverage, they are trying to balance affordability with protection. If they make the limits too high, the cost goes up significantly, and more people decide to take a chance and drive without any coverage at all. If they set the limits too low, auto insurance becomes affordable but nearly worthless, except in the most minor of accidents. Trying to balance these concerns leads most states to err on the side of affordability.

Why you should get covered

Don't confuse "minimal requirements" with "adequate protection." If you are at fault, and the claims against you exceed your insurance coverage limits, two very important things will occur:

  1. You will be responsible for the unpaid portion of the claim or claims filed against you.
  2. Your insurance company will stop providing you with legal counsel for your defense, and lawyers can be very expensive.

How much does an upgrade cost?

Buying liability insurance is like buying breakfast cereal. There is a price for the small box, but then for just a little more, you can step up to a bigger box with almost twice the corn flake goodness inside. Throw an extra buck or two at the grocery store, and you are walking out with a bag that will cover breakfast and midnight snacks for two weeks!

The cost may seem high for the state minimum liability limits, but just like corn flakes, you could double your limits for a lot less than double the premiums. At a minimum, you should purchase an auto insurance policy with liability limits that are at least equal to your assets, but get a quote on the next higher level of liability coverage. You may be surprised at how little it cost for a lot more protection.

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