A common question when considering the auto insurance purchase is "How much liability coverage should I have?"
Since we cannot predict the future, there is no perfect answer to this question. Everybody's situation is different, so there is no "One Size Fits All" answer.
But, in determining an answer that works for you, first you need to understand what liability coverage is. Basically, there can be two types of liability claims, and some accidents will involve both:
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Bodily injury: This would be if you cause an injury to another person (or people) because of a car accident. If you are at fault in the accident, you can be liable for these injuries to other people. While some accidents will result in only minor injuries, other accidents can cause major injuries to multiple people, including long term or permanent injury, or even death.
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Property Damage: While most often this would be damage to another car or other vehicle on the road, it could also include damage to buildings or things like light poles or fences along the roadway.
So now you are thinking, what should the limit for this coverage be on my policy?
Many auto policies include this coverage with a limit for bodily injury per person & per accident, with a separate limit for property damage. Minnesota requires this coverage with a limit of at least $30,000 per person and $60,000 per accident for bodily injury, and $10,000 for property damage. Or, if the policy has this coverage in a Combined Single Limit, the minimum required limit is $70,000.
Unfortunately, these limits are not adequate for most car owners. How many cars on the road today are worth more than $10,000? What if the accident results in a total loss to the other car? If you are liable for damages that a greater than your policy limits, you can be forced to pay that uninsured loss out of your own pocket.
Most car owners should have limits that are much higher than this minimum required amount. For most car owners, a limit of $100,000 per person and $300,000 per accident with $100,000 for property damage should be the minimum you should consider, and higher limits like $250,000 per person & $500,000 per accident would be better. If you have coverage with a combined single limit, consider a limit of $300,000 of $500,000.
For many of you, it would be a good idea to increase this coverage amount with an Umbrella Policy. This would add an additional $1 million (or more) of liability coverage on top of the limits provided by your auto and homeowners insurance.
The best part of this is that you can usually increase these limits for a very reasonable additional premium, and a basic umbrella policy with a $1 million limit could cost as little as $200 annually. People will often spend too much time considering the deductible on the policy for damage to their own car, and shortchange themselves on the liability limits they choose. But, the liability limit is the most important part of your coverage, as this coverage will protect you from a huge loss that you would have little or no chance of covering without the insurance.
If you have any questions about your auto insurance, contact us. Were here to help!