Being involved in an automobile accident can be traumatic for anyone. If it turns out the accident is your fault, it can be even more stressful. However, there’s one thing that can quickly turn the situation into a financial nightmare: not having adequate liability limits on your auto insurance policy.
It’s common for people buying auto insurance to simply choose the minimum liability limits required in their state to keep their premiums down. And most people don’t think about the financial risks associated with those limits when they’re pulling out of their driveway each day.
Below are some sound reasons why you should:
First, it’s no secret that we live in a lawsuit-happy society. If you cause an accident in which another driver is injured, it’s a good bet he or she will get a lawyer. If the bills for the victim’s injuries, damages, and lost wages go beyond the liability limits of your auto insurance policy, you’ll likely be sued, and the victim’s lawyer is going to be looking at your assets, both what you have now and anything you may accrue. You could end up facing years of reliving the nightmare as you struggle with legal maneuvering, a bruised credit rating, and possibly even bankruptcy. Instead of getting on with your life, the nightmare could own you.
Second, states haven’t updated their minimum liability requirements in decades, so those minimum limits simply aren’t adequate for today’s lawsuits, where damages can run into the millions. One large claim could devastate your life's savings, and even take the equity in your home.
How much liability coverage should you carry?
That depends on your situation. Basically, you want enough liability coverage to protect your assets and shield you from legal defense and claims costs. But before you choose your liability limits, ask yourself two key questions:
- How much do you have to lose? Take stock of your assets, including your home, vehicles, bank accounts, investments, and even wages. Are your liability limits high enough to keep your personal assets from being put at risk? If you have assets to protect, you should consider boosting your liability limits.
- How much risk are you willing to take? Everyone has a different appetite for risk. You need to decide if you’re willing to risk everything you have by keeping inadequate liability limits. If you don’t have significant assets, you may be less inclined to carry higher limits. Just remember that if you get caught up in a lawsuit, the personal assets you do have could be at risk.
So how much liability coverage is enough? Most financial advisors recommend carrying liability limits of at least $100,000/$300,000 but with six and seven-figure legal settlements becoming more common, even those limits may not be enough to protect your assets.
Are your auto liability limits high enough to protect you from financial disaster? Contact BNC today, and we’ll help you figure out what works for your budget, your lifestyle, and your financial goals.
If you are an existing BNC Insurance personal lines customer, please read this letter regarding new account executive assignments.