What is really at stake when you are picking your liability limits? Your liability limits are what protect you are your family the most including your current and future assets. We understand that liability limits sound a lot like insurance talk and you are not interested. However, before you check out let me have a few moments of your time. I want to explain liability limits both what they are and why they protect your family the most.
What are Liability Limits?
Liability limits refer to the maximum amount of money your insurance company will pay if something bad happens to you, your stuff or your property. Limits are often set up on a per person and per occurrence basis. Along with a maximum for property damage.
On your auto you may see 100,000/300,000/100,000 as your liability coverage. This breaks down into $100,000 per person/$300,000 per occurrence/$100,000 for property damage. Liability coverage is required and state minimums vary from state to state for your auto insurance.
On your home the liability portion of a homeowners policy covers you against lawsuits for bodily injury or property damage that you or your family members or pets cause to other people, as well as court costs incurred or damages awarded. You will want enough liability insurance to protect your assets.
Liability Limits: What is Really at Stake?
It is required, but I am not talking about minimums here. I want to explain what is really at stake for you and your family if you don’t have high enough liability limits. What is really at stake is your current and future assets. You cannot bankrupt out of insurance settlements. The best way to explain is with an example.
Auto Liability Limits Example:
If you are in an auto accident that is determined to be your fault and you max out your liability limits. First we hope this never happens, but let me walk you through what could happen. You are at a stop sign and you pull out and hit someone that you just didn’t see when you looked that way. That person was driving a BMW, has two kids in the car that are injured and the person driving also has extensive injuries. You have 100,000/300,000/100,000 limits. It will take about 2 days to max out all of your limits. At that point you are responsible for paying the settled upon amount. You cannot file bankruptcy. They will take your current assets and then garnish your wages until the debt is paid.
This is why liability insurance is so important. Coverage on your vehicle is nice, but that can be replaced. Coverage on your families livelihood is by far more important. Go check your policies now to see what your limits are for your home and auto…..is it enough? If you are worried or have questions call your agent and have them do a policy review. We are always happy to help customers work through questions about insurance coverage.
If you are looking for more liability insurance above and beyond what your auto and home policies can provide be sure to check out our blog on umbrella insurance. It is a minimum of $1,000,000 in additional liability coverage that kicks in if you max out your home or auto liability limits. You can check out that blog here.