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September 06, 2016

Are your auto insurance liability limits enough to protect your assets?

Think back to when you last bought auto insurance. Did you spend much time thinking about your liability limits, or did you just choose the minimum limits to keep your premiums down? There’s certainly nothing illegal about carrying only the minimum limits required in your state. But are those limits really enough these days? Consider a few facts:

  • The economy is growing and gas is cheap, so there are more drivers on the road driving more miles.
  • Liability lawsuits are on the rise, with six and seven-figure settlements becoming more common.
  • 2015 saw the highest one-year percentage increase in traffic deaths in the U.S. in 50 years according to the National Safety Council (NSC).
  • The average cost per auto insurance bodily injury claim rose more than 30 percent from 2005 to 2013, while the average cost per personal injury protection (no fault) claim jumped 38.2 percent, according to Trends in Auto Injury Claims, 2015 Edition by the Insurance Research Council (IRC).

With those kinds of numbers, you may want to think twice about choosing the minimum liability limits on your auto policy.

Consider what you have to lose.

What kind of assets do you have? Your assets can include your home, vehicles, bank accounts, investments, and even your wages. If you’re involved in an auto accident and found liable for damages and injuries sustained by others, your minimum liability limits may not be enough to cover medical bills, lost wages, and damages, especially if there are multiple vehicles and multiple injuries involved. If your limits are exhausted, you can be sued for payment of injuries and damages beyond what your insurance will cover – and if you lose the lawsuit, your personal assets could be next on the chopping block.

Keep in mind that if you get sued, it’s the job of the plaintiff’s attorney to track down all of your current assets and any assets you may accrue later. Any one of them could be fair game in a lawsuit if you don’t have adequate liability limits and don’t have the cash to pay for injuries and damages you’re found liable for.

How much liability coverage is enough?

Most experts say you should carry liability limits of at least $100,000/$300,000. But what about those six and seven-figure legal settlements that are becoming more common? What if you own a home that’s worth $2 million? In today’s litigious environment, you need enough liability coverage to protect your assets and shield you from legal defense and claims costs.

Higher limits = lower financial stress.

Being involved in an auto accident is traumatic enough. The last thing you need on top of that stress is to find out your insurance coverage isn’t adequate. The best way to eliminate that financial stress is to make sure your liability limits are high enough to protect your assets. Take a good look at your assets, your budget, and your personal and family needs to determine the right liability limits for your situation.

Whatever you do, don’t roll the dice by getting the minimal coverage just to keep your insurance rates down, especially if you have a high net worth. Remember, the more assets you have, the more assets you have to lose in a lawsuit.

If you want even more protection, consider an umbrella policy that provides supplemental coverage when your standard homeowners and auto policies reach their limits.

Want to stack the financial deck even more in your favor? Partner with the insurance experts at Heffernan Insurance Brokers. 

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