Why should you consider higher auto limits on your car insurance policy? The short answer is: While the minimum limits may provide the cheapest rate in the short term, they don’t provide ample protection for what you value most to protect you and your family’s financial security.
First, let us back up and explain what we mean by auto limits. Your car insurance coverage limits, also referred to as limit of liability, is the most your insurance will pay if you have a claim. Choosing a higher coverage amount provides you additional protection if an accident occurs. You’ll often see coverage limits that look like this: $50,000/$100,000. The first number, $50,000, is the maximum amount your coverage will pay per person in an accident. The second number, $100,000, is the maximum your car insurance will pay for the total accident. For example, if your limit is $100,000 and the cost of your accident is $105,000, you’ll have to pay the remaining $5,000. In the state of Colorado the minimum required liability limits are $25,000/$50,000/$15,000 with a maximum limit available for purchase of a $500,000 combined single limit.
We’d like to share with you four factors you should consider when choosing your auto liability limits as well as real customer claims examples for you to keep in mind.
- Medical bills add up. While $100,000 might sound like a lot, it doesn’t go very far if you’ve injured someone in an accident. Consider the costs of ambulance ride, the hospital stay, necessary tests and recovery expenses. The rising cost of medical care means those limits will run out more quickly.
- Cover the unexpected. In 2014, there were 6.1 million police-reported crashes, and every one of those people probably thought it would never happen to them. Out of those 6.1 million, 2.3 million people were injured as a result. The annual cost of medical care and productivity losses related to motor vehicle crashes added up to more than $80 billion.
- Protect your future. Even if you don’t own a home or a nice car, you still need adequate protection. When your limits run out, you’re still expected to pay what’s owed. If there are no assets to take that from, it will come out of current and future income until the debt is paid. Some states are allowed to take 25% of a person’s income if necessary.
- The price difference is minimal. Just because you’re tripling your liability limits doesn’t mean you’re tripling your rate. In actuality, it may only be a $50 difference. Considering that means adequately protecting your family, your home and your future income, that’s not much extra premium.
We’d also like to share two real life customer claim scenarios Safeco Insurance recently provided our agency where limits of liability came into play and where the insureds may have regretted not purchasing higher limits.
- Claim Scenario #1: The customer thought he was in drive, but was in reverse and backed over his friend as he was moving his vehicle. His friend sustained a serious fracture to her leg, requiring surgery. Her hospital stay, surgery and all treatment resulted in over $135,000 in medical expenses. The customer’s liability limits were $100,000, leaving him with a potential of over $35,000 in out-of-pocket expenses.
- Claim Scenario #2: The customer struck a 53-year-old pedestrian. The pedestrian was taken straight to the hospital with multiple breaks and fractures and a bruised intestine. He spent multiple weeks in the hospital, including emergency surgery, a chemically induced coma and now has multiple plates and rods supporting his limbs. He’s also struggling with memory. His medical bills have totaled $408,000 so far, not including recovery time. The customer’s limits were $100,000, leaving him with a potential of hundreds of thousands in out-of-pocket expenses.
As you can see, saving a small amount of money for low limits of liability in the short-term, could cost you up to hundreds of thousands of dollars in the long run if a disastrous accident occurs. We truly want to protect the assets and financial security of our customers and highly encourage you to review your limits or call our office to make sure that you are covered adequately. Our insurance team would love to speak with you and assist you with any questions or concerns you may have.