Unfortunately, there will never be a perfect answer for this common question as no two accidents or lawsuits will be the same. I will give my opinion of the minimum of what every individual and business should carry at the end of the post (go ahead scroll down, I dare youJ), but first I think it’s important to understand why auto liability insurance is so important in the first place.
When I discuss auto liability insurance coverage with prospects and clients, it can be easy to take for granted that they already understand the importance of this coverage. The reality is that most consumers (both personal and business) don’t really grasp what auto liability is all about.
What is Auto Liability Insurance?
At the core, auto liability insurance protects drivers who may be liable for an accident for two major items.
- Bodily Injury—You injure someone else as the result of an auto accident. This seems very straightforward, but what about damage to multiple injured parties? What about injuries that cause permanent damage? What about injuries that cause the injured party to miss work? What about a fatal accident?All of these scenarios seem scary and they should be. Let me provide an example combining all of these. You are driving down a road and prepare to stop at an intersection. You hit a patch of ice and your car slides and hits the side of another vehicle. There are three additional passengers other than the driver. The driver was seriously injured and has permanent injuries causing him to miss work for over a year. The two passenger side passengers were injured and spent a week in the hospital. The rear driver side passenger was killed.
Does this sound like a nightmare? Unfortunately, this is a reality and even though it was a complete accident, huge damages will be assessed to the driver. How much? That is up for the attorneys, judges, and maybe a jury to decide.
- Property Damage—This coverage is just like is sounds. Any damage that you would be responsible for that caused property damage from an auto accident. This is typically used for other vehicles that you damage, but can also be used for buildings, structures, or any other property that your car may have smashed.
How Much Auto Liability Insurance Should I Carry?
Ok, be honest, some of you scrolled right through my boring important stuff to get here.
At a bare minimum, I feel that all individuals should carry at least $500,000 in liability and property damage with a $1,000,000 umbrella. In essence, that is a $1,500,000 in insurance coverage. Business should carry at least $1,000,000 in auto liability with $1,000,000-$10,000,000 umbrella depending on the type and size of business. Many states only require $20,000 or $25,000 of liability per person. That is laughable and really scary. Go back to my example above, how long do you think $25,000 is going to last?
I know what some of you are thinking. “C’mon Brent, we are on a budget. We don’t have the money for these huge liability limits.” While I do appreciate that everyone is on a different budget, I can’t stress the importance of maintaining high auto liability limits enough.
Here’s the best part, auto liability is one of the best buys in insurance.
You can increase your auto liability insurance limits for very minimal premium increases. I see many people worrying so much about their comprehensive and collision coverage for their own vehicles and other trinket coverage, that they shortchange the auto liability. Remember, the auto liability is the important part!
Take time to discuss your auto liability needs with a knowledgeable insurance agent with the heart of a teacher.
How much auto liability do you think is enough? Why? Sound off.