A lot of knowing about car insurance liability involves looking at a driver’s policy as well as his or her assets. Here’s one way to look at liability limits in terms of the bodily injury and collision damage costs that are covered by an auto policy.
The first thing to recognize about your liability auto insurance is that most insurers break it down into three numbers. You might see something like 25/50/25 on your policy. What this means is that the policy will cover payouts for the first $25,000 for the first person involved in the incident, up to $50,000 for total personal injury per incident, and up to $25,000 in property damage. In other words, the first two numbers on your breakdown are for covering bodily injury, and the third number is for covering collision damage.
Each state in the US has a specific minimum amount of liability insurance the driver must buy to stay on the road legally. However, buying that minimum liability insurance does not mean that you have covered your costs in a potential accident situation. To learn more about this, take a look at how the average driver’s assets affect what they buy.
In general, if a driver does not have assets, such as property, savings, or expensive valuables, they won’t bother with buying additional liability insurance, but instead would just take out the minimum liability mandated by the state. However, for anyone who wants to protect themselves from expensive court judgments, additional liability insurance is a good idea. These policies might look more like 100/300/100, where according to the above setup, the driver would be covered for $300,000 in total bodily injury and $100,000 for property damage. Drivers could also choose policies that more accurately reflect the high cost of healthcare, where the third number would be much lower. The basic idea is to think about what costs a collision might generate, and be prepared to pay higher premiums in order to get more extensive liability coverage.
Those with a lot of assets who are looking at liability insurance can also look at an umbrella policy. This is a comprehensive insurance policy that would cover not just auto related accidents but liabilities related to home ownership and other situations as well. Insurers can help individual households come up with customized umbrella policies that are crafted to their specific needs. This can be a handy alternative for trying to guess at what kinds of auto liability coverage may be necessary in any given year, as inflation and specific health care cost increases can make last year’s policy somewhat obsolete.
All of this can give inexperienced drivers and auto insurance buyers a much clearer picture of how liability insurance works to protect them and to safeguard their financial responsibility for anything that may happen on the road.