Auto Insurance Liability - do you know what you have?

Often when a prospect calls for a new auto insurance quote, when I ask them what the limits are on their current liablity policy, they often don't understand what I'm talking about. Either no one has ever explained to them what these numbers mean or they don't remember. I do my best to educate everyone I talk to about these limits, so they will understand what they are and how important it is to make sure you have enough liability coverage to protect you.

Here is an example: In NC, the Department of Motor Vehicles requires every driver to have liability insurance. The limits of liability required in our state is $30,000/60,000/25,000. Looks like a complicated math formula, doesn't it? It's really not that complicated but a lot of people either have never had anyone explain it to them or they've forgotten. So as your Agent that's where I step in to help you understand what those numbers mean so you can make a good choice on the amount of coverage you need.

The first number in our example, $30,000, stands for the bodily injury portion of your liablity. This coverage is for the person in the OTHER vehicle if you cause an accident and that person gets hurt. The first number is how much your policy will pay PER PERSON.

The second number, $60,000, is the bodily injury PER ACCIDENT TOTAL your policy will pay.

So for example, if you cause a bad accident, and hurt 3 people, one person has medical bills of $50,000, the second person $20,000, and the third person $10,000, your policy will pay the first person $30,000 (the limit of the PER PERSON number), the second person the whole $20,000, and the third person the whole $10,000, which adds up to the PER ACCIDENT TOTAL of $60,000. Do you see a problem here? That's right - person one had $50,000 in bills but your policy only will pay them up to the $30,000 limit. What happens to the other $20,000? You caused the accident, you are liable for their injury, so guess what, you are responsible to pay their other $20,000. Your insurance company will try to settle within your policy limits but if they cant, they will hire an attorney to defend you, and it could end up going to court before a jury. Often the jury will award the injured person even more than what their medical bills were for pain and suffering, especially if they have a permanent injury. They can place a judgement against you for the difference in what your policy paid and the amount the injured person was awarded. They can put a lien on your home, make you sell property you own, even seize checking and savings accounts. (In other states they can even garnish your wages until the judgement is paid but they can't do that in NC). The judgement stays on you for 10 years and at that time it can be renewed. This is NOT a good situation to be in.

The third number in our example, $25,000, is for property damage. This is the limit your policy will pay to the other party for their vehicle or personal property. What if, for example, you cause an accident in which you rear end a vehicle, and it pushes that vehicle into a building. What if that vehicle was a 2010 fancy something sports car worth $40,000. What if the damage to the building was another $10,000. Your $25,000 limit won't cover the $50,000 damage you caused, so once again you're faced with being sued, a possible judgement, lien, siezure of your property, etc.

PLEASE take the time to review your insurance policy to make sure you have high enough limits on your liabilty to cover your assets and protect your future! You can also purchase a policy called an Umbrella policy that picks up where your auto insurance leaves off. Call us today if you have any questions about your coverage or would like a free policy review!