Are You Carrying Enough Liability on Your Car Insurance
While many drivers think of car insurance as a way to protect the cars they drive, there is a much more important benefit to carrying sufficient insurance coverage. While being able to fix your own car is certainly important, the main purpose of automobile insurance is to provide liability protection in the event of an accident that is your fault. This liability coverage provides protection against not only property damage but any bodily injury that may result from the accident.
Unfortunately, all too many drivers view liability coverage as almost an afterthought, something to be addressed after the deductibles have been established and other insurance decisions have been made. As a result, many drivers are dangerously underinsured, and that can leave them open to lawsuits and the loss of the personal assets they have worked so hard to accumulate.
The good news is that adding more liability coverage is generally not as expensive as you might imagine. Depending on the state you live in and your driving record, ramping up your liability coverage from the state mandated minimums to a more realistic level may only cost an extra hundred or so dollars a year. This is a small price to pay for the peace of mind that comes from knowing you are truly protected from a financial catastrophe.
State Minimum Coverage May Not Be Enough
Most states around the country now require that all licensed drivers carry car insurance, and the states that have instituted this requirement typically mandate a minimum level of liability and property damage in order for the policy to meet the demands of the law.
The problem is that those state mandated coverage levels are often dangerously low, leaving many drivers uninsured without even knowing it. Just consider that in some states the minimum amount of coverage needed to satisfy the law can be as low as $20,000. Just think about how many cars on the road cost far more than $20,000 and you can begin to see how inadequate this protection can be.
One of the best things you can do is pull out a copy of your most recent insurance policy and examine it carefully. Look at the levels of liability coverage listed there and ask yourself if that coverage is really adequate for your needs. If you have personal assets in excess of your liability coverage, you could be on the hook for the additional monies in the event of an accident.
Put the Insurer in Your Corner
Ramping up your liability coverage can also have another important effect. When your liability coverage limits are higher, you put the insurance company – and their lawyers – squarely in your corner in the event of an accident. The more the insurance company has at stake, the harder they will fight for your interests. This may not seem fair, but it is just a part of the insurance business.
Many drivers wonder how much liability insurance coverage is enough, and unfortunately it is hard to make a blanket statement about the optimum level of coverage. Each driver will have a different set of needs, and it is important for each driver to assess his or her situation carefully to find the right level of coverage. It is often helpful to call your insurance agent and price several different liability options. You may find that the cost of raising your liability coverage is so low that you can afford a very high level of coverage. Making your automobile insurance part of your overall financial plan is another smart strategy – a CPA can look at your entire financial picture and help you find a level of coverage that best meets your needs. But no matter what level of coverage you ultimately choose, it is important to take the first step by checking your current coverage and making sure it still meets your needs.