This post is part two of the blog post that answers the question “How much car insurance is enough?”
Money for Harm You Cause Others
Your liability in a car accident can go far beyond damages to other people’s vehicles and property. If someone is injured – whether another driver or a pedestrian – you may be responsible for medical bills and other expenses, such as rehabilitative care and lost wages. From texting and driving to tire blowouts and weather-related collisions, it does not matter how the accident happens – only that it did and that you were completely or partially at-fault. Bodily injury liability insurance helps protect you and your assets against financially devastating lawsuits and liabilities caused by bodily injuries in a car accident.
Bodily Injury Liability Coverage Options
Insurers offer bodily injury liability protection in one of two different ways – split limits and combined single limits. Split limits are listed in your policy as two different numbers delineated by a forward slash (i.e. 100/300 or 250/500). The first number in the sequence is the amount of coverage in thousands that the insurer will provide per person in an accident. The second number in the sequence is the amount of total coverage in thousands the insurer will cover per accident. Combined single limits are a little more straightforward. It is typically listed as one number (i.e. 300 CSL). This number indicates the total amount of bodily injury liability the insurer will cover in thousands for an accident with no per-person limitations.
State law requires drivers to carry a minimum amount of bodily injury liability coverage. Here in Arizona, the minimum required limits are 15/30. Going without it could result in fines and penalties, but simply having the minimum bodily injury liability protection is still not enough to reduce your risk vulnerability. In the case of liability protection, having high enough limits is essential. Otherwise, you could be financially ruined for life.
How Much Could You Be Sued For?
Awards for bodily injury liability vary by circumstance and typically consist of both compensatory and punitive damages. Compensatory damages may include medical bills, future medical bills, lost income, and even emotional distress. Depending on the person you injure and the extent of the injuries sustained, those costs could easily total hundreds of thousands or even millions of dollars. Add in the punitive damages a jury may impose as punishment for gross negligence, such as for drinking or texting while driving, and it is easy to see why having the right coverage limits is so important. If you are underinsured, you could lose all of your savings and face a lifetime of wage garnishment until you satisfy the judgment.
Money to Protect You and Your Passengers against Uninsured or Underinsured Drivers
If a court awards money to you for harm sustained by you and your passengers in an accident, the at-fault driver and his or her insurance are required to pay. If that driver does not have the means to pay – whether due to having too little coverage or no coverage at all – your uninsured motorist (UI) or underinsured motorist (UIM) protection can pick up the slack. UI is coverage for your personal losses when the at-fault party has no insurance at all. UIM takes care of the shortfall when an at-fault driver does not have high enough insurance limits to cover your losses. Because it is guaranteeing financial coverage for any injuries you and your passengers sustain in an accident, it’s easy to see why this is perhaps the most important coverage on your car insurance policy.
Money to Help with the Smaller Things
Accident-related expenses can add up quickly and go beyond the cost of injuries, property damages, and liability. What will your health insurance deductible cost you out-of-pocket? How much will it cost to have your car towed after an accident? What will it cost to find temporary transportation until your damaged vehicle is repaired or replaced? Fortunately, car insurance policies can be custom-tailored to take care of even the ‘small things’ that can add up to major expenses. From towing and rental car coverage to medical payments insurance that can help with medical bills regardless of who is at-fault, there are several coverages available to minimize the financial burden of an accident.
Beyond Car Insurance
There are some extreme cases when even the highest limits of available liability coverage are not enough. For example, if you cause an accident that paralyzes a young physician, you could be responsible for $500,000 in medical bills, several million dollars in lost future income, and compensation for emotional distress. In this case, even high-limit liability coverage would barely cover the medical bills, leaving millions in damages still to be paid out-of-pocket. In this type of situation, an umbrella policy could offer extended liability protection of $1 million or more. We recommend that all of our clients strongly consider an umbrella policy given its very affordable price and the value of the coverage.