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State-mandated mimimum auto liability limits are inadequate to protect assets

By Compuquotes Team on February 3rd, 2011

When I talk to people about auto insurance, liability limits keep coming up. Why should you carry more insurance than the law requires? How much is enough?

Bodily injury liability coverage pays for injury or death of the driver and/or passenger(s) of another car if you are at fault in an accident. Any medical bills, lost wages or accommodations, like wheel chair ramps and caregiver wages, are all part of a bodily injury claim. Any death claim is also paid by your bodily injury coverage.

Your car insurance company is required to make payments for a bodily injury liability claim on your behalf until the limits of your policy are exhausted--and then you are on your own. Your insurance policy provides you with a legal defense until the liability limits on your policy are exhausted, and then you will have to provide your own lawyer for any remaining costs.

A cautionary example

Here is an example of how this works. I am traveling with my wife and my son, and traffic has come to a stop. There is a van behind me, and you are following the van. I stop, the van swerves to the left and you are suddenly faced with a line of stopped traffic. You plow into the back of my car, driving me into the car ahead of me.

The result? I am killed in the accident. My son fares better and escapes with bruises and a concussion. My wife survives but suffers a broken pelvis and collarbone, which requires an extended hospital stay and recovery. We won't even get into the injuries in the car ahead of me.

At 47 years of age, I have 20 years of wages I have yet to earn. I am no longer here, and you will be responsible for those missing wages. My wife can't work for 9 months, and requires extensive physical therapy and assistance. My missing wages alone will be close to $1 million, not to mention the rest of my wife's medical bills and her lost wages.

Unfortunately, this is not an unusual accident scenario. You see how quickly this bodily injury claim could add up. Your auto insurance limits of $50,000 per person, $100,000 per accident seemed like a lot of money when you purchased the policy, but it looks a little short now. Your insurance carrier will pay out $50,000 of my claim, and $50,000 for my wife, but you are held accountable for the balance. The minimum liability limits you opted for could mean that your assets are seized, your wages are garnished and you could be left in financial ruin.

Do you have enough liability coverage?

State minimum liability limits typically do not provide enough liability coverage. Even the state minimums that are on the higher end of the spectrum are woefully inadequate. Consider the liability limits on your auto insurance policy and consider increasing your liability coverage to ensure you are financially protected.



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