If you drive a car, you likely have auto insurance. Your insurance policy provides coverage against the many exposures of owning a vehicle. One of the most important perils it covers is your liability associated with operating a vehicle.
If you are found liable in an accident, it means that you could be held responsible for any property damage or bodily injury resulting from the operation of the vehicle.
What is an auto liability limit?
Take a look at your insurance policy. On the very first page (called the Declarations Page) you will see amounts listed for bodily injury per person, bodily injury per accident, and property damage per accident. These limits may read something like 250/500/250. This means that if you cause an accident and are found liable, your insurance will provide up to $250,000 to pay for bodily injury to any one occupant in the other vehicle, up to $500,000 as a total bodily injury limit for all occupants in the other vehicle, and a separate $250,000 to pay for property damage (damage to the other vehicle). Keep in mind these are liability payments, meaning this amount does not factor any payments in for your medical bills or damage to your vehicle. That is separate coverage in your insurance.
The limits mentioned above may sound like a large amount. If you consider yourself a good driver, you may think you could never cause such an accident. But let’s consider, for instance, how large a medical claim can actually be. According to Verisk Analytics, the average claim payout of a bodily injury incident to a single person was over $15,000 in 2013. Now factor in inflation and what could happen in a more serious accident. A few days in the hospital could cause a single person’s medical bills to reach over $100,000.
What kind of limits should I purchase?
Certain states have enacted state minimum liability limits, or the bare minimum a person is required to carry. In Ohio, this limit is 25/50/25. Based on the information above, it is easy to see how this may not be enough insurance for an accident. Let’s say you accidentally cut someone off in traffic and you injure three people in that vehicle whose medical bills total $500,000. What will happen if you carry only state minimum limits? Your insurance will only pay up to $50,000 (the total bodily injury limit for all injured passengers). Then YOU will be responsible for paying the rest of the bills. If you don’t have $450,000 in cash lying around, the courts could garnish your wages or your assets may be seized.
In short, auto insurance is not the place where you should be penny-pinching. While it may cost a few extra dollars now for higher limits, it’s worth avoiding potential financial ruin down the road.
For even more protection, consider a personal umbrella policy. Contact your independent agent to see what options are best for you.