When buying auto insurance, you may be tempted to opt for the liability limits your state legally requires you to carry, and pay lower premiums. However, this can be a dangerous decision.
If you’re at fault for an accident, the liability portion of your policy would pay for two things:
- Bodily injury liability would pay for another person’s medical expenses.
- Property damage liability would pay for damage you cause to another person’s property.
If damages and medical expenses exceed the policy’s limits, you’re responsible for them out-of-pocket. If you can’t pay out-of-pocket, you could be sued, and if found liable by courts, your assets could be seized or wages garnisheed.
According to the AAA, the average auto accident costs roughly $26,000. In some states, required liability limits would barely begin to cover the costs of repairing or replacing vehicles, other property damage, or medical expenses.
For example, Ohio only requires $12,500 in bodily injury coverage and $7,500 in property damage protection. If you plow into a Porsche with two people inside who require emergency medical care, you could end up paying hundreds of thousands of dollars from your own pocket because of insufficient coverage.
Carry at least $50,000/$100,000 in bodily injury liability (limit per person/limit per accident respectively), and $25,000 in property damage. If that’s too costly, carry $25,000/$25,000 plus $25,000 for six months to a year, and step it up the following year. You’re unlikely to see skyrocketing rates, because you’re establishing “financial responsibility” as a policyholder, meaning cheaper rates in the long run – another reason minimum coverage isn’t really the cheapest.
Carrying state minimum liability simply means you’re legal to be on the road – it doesn’t mean you have sufficient protection. Talk with your insurance agent to find a coverage you feel adequately protects you. Then be confident that your financial future is secure – at least insurance-wise.