by Margie Coghill
t can be tempting to get the cheapest auto insurance policy to save on premium costs, but it is not a good idea. You may have to come up with thousands of dollars to pay for the damages in an automobile accident or file bankruptcy.
What is Liability Car Insurance?
Liability insurance pays others when you are at fault for a car accident that causes injuries or property damage. For example, if you mistakenly hit the gas instead of the brake and crash into a neighbor’s fence, liability insurance can pay for the cost of repairs.
Liability insurance also pays for legal costs if you are sued because of a car accident. It will pay for a legal defense, as well as judgments and settlements that arise out of a lawsuit. If you cause an accident and have insufficient liability car insurance, you could be sued for the rest. For example, if you carry $50,000 in bodily injury liability for one person in a car accident and the medical bills are $75,000, you would be responsible for the remaining $25,000.
What Happens if You Do Not Have Enough Auto Liability Coverage?
If you are found liable for another party’s damages, you could be facing serious costs.
Bodily injury automobile accidents can be costly. An ambulance ride alone averages around $1,000, and if other medical equipment is used, such as IVs or oxygen, the costs can rise. An ER checkup can cost as much as $3,000, and in extreme cases where critical care is needed, the charges can be as much as $20,000. If a person is seriously injured or killed, you could be looking at money damages leveraged against you for hundreds of thousands, if not millions of dollars.
If you are unable to pay for the damages, you could end up in serious trouble. The other party could come after you personally. You may have to take out loans or additional mortgages, which could put you in debt. You could be forced to sell off your assets. You may also be turned over to a collection agency, and the DMV may suspend your license until you are able to pay.
How Much Liability Car Insurance Do You Need?
A good rule to follow is that you need enough liability coverage to protect all of your assets. This includes real estate holdings, savings and checking accounts, investments, college and retirement funds and even future potential earnings.
Most experts recommend carrying at least $300,000 in bodily injury coverage per accident. In addition, you may want to purchase a comprehensive umbrella policy for $1,000,000, which is excess coverage to cover the difference. Umbrella coverage offers high levels of liability coverage at a low cost of about $150 to $300 annually.
What Do Collision and Comprehensive Insurance Cover?
Collision coverage pays for your vehicle’s damage if you hit an object or another car.
Comprehensive insurance pays for non-crash damage, such as weather and fire damage. It also pays for car theft and damage from collisions with animals.
Collision and comprehensive car insurance are often sold together as a package by auto insurers. Full coverage auto insurance is a policy with liability, collision and comprehensive coverage.
Preliminary Data from the National Safety Council
Preliminary data from the National Safety Council has shown that as many as 42,060 people have died in motor vehicle crashes since 2020. That marks an 8% increase over 2019 in a year where people drove significantly less because of the pandemic. In addition, an estimated 4.8 million drivers were seriously injured in crashes in 2020, and the estimated cost to society was $474 billion.
Statistics have shown that about 20 percent of licensed drivers have the minimum in liability coverage in case they hurt someone else. Many of those policies pay as little as $25,000. What would it cost to secure better coverage? The average cost is about $200 annually per vehicle to take you liability limits from $50,000 to $1 million per accident. Increasing your uninsured and underinsured coverage by similar amounts could cost less than $100 annually per vehicle.
Is it worth saving money on your automobile insurance to leave yourself exposed to the possibility of being in a life-altering automobile accident? Please check with your insurance company and find out what your policy limits are and, if necessary, increase your limits to protect yourself.