• Auto Liability Coverage: Understand How Much You Need

    Auto liability coverage is something that every driver should carry, as well as something that is required to drive a vehicle in every state. It’s just part of being a responsible driver, as well as a good citizen. Sometimes it takes huge amounts of money to pay for the damages incurred in an accident; hundreds or thousands of dollars or even more. Most people just don’t have that amount of money to pay for an accident of this sort. Even people who do have the money generally carry liability coverage. It’s just not a safe bet to assume that you can pay for the damages of a severe accident, and beyond just protecting yourself you have a responsibility to other drivers to make sure that they are cared for if you make a mistake.

    That aside, the reality is that most people don’t need to insure themselves for an absolute worst case scenario. It’s unlikely that you’re going to be involved in an accident that incurs millions of dollars worth of damages. It’s actually unlikely that you’re going to be involved in an accident that even requires over a few thousand dollars to settle. When selecting liability coverage, there are a few major considerations that everyone should weigh:

    Local Laws

    Every state has laws that govern the amount of liability coverage that every driver should carry. You should always check the local regulations concerning the minimum amount required. If you’re buying car insurance direct from the provider, you should have to make absolutely sure that you’re in tune with the regulations in your local area; many insurance providers don’t guarantee that the policy you purchase meets local requirements, which means that you could be buying a policy that doesn’t fit your state’s laws. This is one area where an agent is an excellent resource because they are required to know the laws and regulations and will never sell a policy that doesn’t satisfy them completely.

    Protecting Your Assets

    It’s also important to take into consideration how much you are protecting in case of a lawsuit. If you are found liable in an accident and you don’t have enough coverage, you could lose everything you have. Unfortunately if you have substantial assets, that’s often an incentive for other people to go after you more aggressively than they would otherwise. The most important considerations in your decision should be:

    • Your Net Worth – Know how much you’re protecting. This includes the value of everything you own: bank accounts, homes, vehicles, and other assets like stocks and retirement accounts. If you have significant assets, you’re probably going to be best off using an agent who can be trusted to make an insurance game-plan that will cover you correctly.  
    • Legal Costs – Liability claims can include costly legal defense. In many cases your insurance company will provide their own attorneys to defend you, but you should plan for there to be some legal costs.
    • Future Earnings – It’s a good idea to also protect yourself for the amount of your future earnings up for up to 1 or 2 years down the road. A judgment could subject you to garnishment of your future earnings.

    You might also what to consider a gap insurance policy that covers you in the case of the biggest claims. Gap insurance policies often don’t add a substantial amount to your premium and can offer you protection into the millions of dollars.