How much Auto Liability Insurance do I need?

By Alex Chesko | February 2, 2016carfamily

You’ve probably been there – filling out a form online for a car insurance quote and you’re immediately presented with a dozen options for Auto Liability Insurance.  Things like Bodily Injury coverage, Property Damage, Personal Injury Protection, etc.   You wonder – how much coverage do I really need?  $10,000?  $50,000?  More?

Years ago, I sold car insurance over the phone to people for a huge insurance company.  Every day without fail people would call in and tell me: “Just give me the minimum limits that I need to be legal.”   That is just about the last thing that an insurance agent wants to hear.  It’s like a 16 year old driver who just passed their driver’s test, asking for the keys to a really expensive sports car.  Are they legally allowed to drive it? Yes.  Should they?  No! Not by a long shot.  State minimum limits are all you need to legally drive a car in NY – but they offer only very limited protection should you have an accident.

Consider this:  In NY the law requires that you carry a minimum of $25,000 per person/$50,000 per accident in Bodily Injury Liability coverage, and $10,000 in Property Damage Liability.  There are other mandatory coverages – like Personal Injury Protection (PIP) and Uninsured Motorist coverage – but for now – let’s just focus on the first two:

Bodily Injury Liability (BI) covers any injuries sustained by a third party as the result of an accident you cause.  If the other party makes a claim (or files a lawsuit against you) for injuries they sustained this is the amount of money available to pay their claim.

Property Damage Liability (PD) is designed to cover any damage you cause to someone else’s property.   If you hit someone else’s car, a mailbox, telephone pole, guardrail, etc. – this is what pays for the damage.

So how protected are you with just state minimum coverage?  Here’s a sample cost breakdown of two common accident scenarios:

Accident 1

Approaching a stop light, you rear end a car in front of you, pushing that car into the one in front of it:

Liability Insurance costs

If you carry collision and rental coverage on your vehicle – chances are you’d only have to pay your deductible to get your car repaired.  If you don’t carry collision – well that’s $5,340 in out of pocket costs just to get your car fixed.  Worse – with the $10,000 minimum in Property Damage Liability you would not have enough to cover the damages to vehicles 2 & 3 in this scenario.   The combined claims of those 2 vehicles would be $18,067 in this example, leaving you with $8,067 more in out of pocket expenses when your $10,000 policy limit was used up.

Accident 2

You change lanes on the highway, clipping a motorcycle you didn’t see in your blind spot:

Injury Liability Insurance costs

In this case the difference in coverage is catastrophic.  Your $25,000 minimum limit coverage for Bodily Injury doesn’t even begin to cover the value of a serious injury claim.  A lawsuit would most likely be filed against you, and the court could attach your personal assets (your home, savings, wages) to satisfy any judgement awarded against you.

So how much coverage is enough?  The traditional, politically correct answer to this question is something like “Coverage is a personal choice.”  Technically it is, but if you’re choosing minimum coverage – well…

chosen poorly

Do you really want to be the person that saved $60/year on insurance only to lose your house and have your wages garnished because of a lawsuit verdict your minimum limit policy couldn’t cover?

In NY, I always recommend to my customers Bodily Injury Liability Insurance limits of at least $100,000 per person/ $300,000 per accident, and no less than $50,000 in property damage coverage.  Could a serious accident exceed that amount?  Absolutely – but it’s enough to absorb most common, run of the mill claims. The more coverage you carry, the more serious the accident your policy can absorb without exposing your personal assets.   And the difference in cost between some of the higher coverage limits is usually pretty minor – you may be able to add $100,000 – $250,000 in coverage to your policy for as little as $10-15/month!

I’ve even seen cases where insurance companies charge a higher rate for people who select minimum coverage limits than those who pick higher amounts.  As backwards as it seems – there is a method to their madness.  Over the years statistics have shown that drivers with minimum limits have more frequent accidents than drivers with higher limits.  So carriers tend to place higher rates on policies with low limits.

When in doubt – talk to your local agent and they can show you a range of coverage options to find the best fit for your situation.  A good agent can find you the best coverage to meet your needs and fit your budget.

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