Adequate Liability Limits

The limits will be printed under “Bodily Injury”. Make sure your coverage is adequate.

• Uniformity. Make sure you have the same coverage for each of your cars. Sometimes, when you add a car (say for example for a child), the broker does not match the other coverages, and you are only as well protected as the lowest coverage you carry.

• Types. There are two kinds of coverages – “single limits” and “multi-limits”.

Single limits, as the name suggests, has a single coverage against claims for everyone in your car and the other car. For example, a $100,000 single limit coverage provides $100,000 in coverage to everyone who can claim against the driver and the car’s owner. This can pose a problem if two, or even more, people are seriously hurt. This raises the possibility of a lawsuit, since multiple claimants have to compete for the same money.

Multi-limits are safer protection. The typical combinations are (in thousands of dollars) 25/50, 50/100, 100/300, 250/500 and 300/500. This provides a set limit on what any one person can claim, and an aggregate on what the carrier will pay in your behalf for the accident. For example, $100,0000/300,0000 coverage assures that up to three seriously hurt individuals can collect up to $100,000 each, the carrier will pay out $300,000, and you do not have to worry about one person targeting you for the whole $300,000, and thus preventing other, less seriously hurt claimants from being compensated.

• Amounts. You can never have enough coverage. How much to buy is a trade-off between your needs and what you can afford.

At a minimum. For adequate protection, based on my experience (with over 800 auto insurance claims resulting in payments in this area), these days you need to carry at least $100,000/300,000 coverage. Inflation and contemporary jury attitudes have made even moderate injuries potentially worth this amount, and even more. That is particularly so if you are sued by a person whose earning power is affected by the accident. For example, a nurse whose broken ankle prevents her from serving as an operating room attendant may be forced into a sedentary position, and thereby lose $15,000 a year -- $300,000 over her 20-year career. A truck driver with a bad back who has to give up interstate hauling can easily recover from $750,000 to a million dollars in economic losses.

The need for high coverage is proportional to the net worth of the assets you need to protect, say a lot of equity in your home. A college student has little to lose. A married couple with $200,000 in equity in the family home may have everything to lose.

• Umbrella coverage. For those in need of good protection, the cheapest alternative is an umbrella policy.  These usually cost $300 to $450 per year, and can offer you up to $2,000,000 in personal protection

Find out from your broker what options are available. If you are offered none, consider switching insurance to a broker who has an integrated line of products.

Avoid ‘umbrella gap’ problems, by making sure you have at least enough auto liability coverage on the main policy to satisfy the umbrella insurer’s requirements. For example, if you have $100,000/300,000 coverage on the car, and you buy a $2,000,000 umbrella policy that requires you to have at least $300,000 single limit coverage, you haven’t bought much. If one person with a million dollars in injury value is hurt, the auto policy pays $100,000, then you are on the hook for the next $200,000 before the umbrella "trigger" kicks in.

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