In 2019 personal auto insurance companies paid over $158,000,000,000 to protect their clients ($158 billion). That is not a misprint, and the figures represent a continued steady climb. 2019 is the most recent year on which data is currently available, and since 2015 damages due to auto accidents increased by over 24%. * With this steady growth, clients must ensure they carry adequate car insurance limits.
State Minimum Liability Limits
State minimum liability limits are severely inadequate for many auto accidents. These minimum limits are often misunderstood by clients to be state recommended limits, when the exact opposite is true. Instead, they are the bare minimum insurance levels allowable by the state to legally drive and, according to most industry professionals, are well below recommended coverage levels. Below is a chart of state minimum limits published by the opens in a new windowInsurance Information Institute.
Auto insurance includes two primary types of liability coverage: bodily injury and property damage. Bodily injury limits represent the most the insurance company will pay should you injure another person. Property damage liability limits represent the most they will pay should you damage another vehicle or other property. For example, according to the chart the state of Alabama requires a minimum limit of $25,000 for bodily injury for each person involved in an accident, along with $50,000 per accident in total. They also require a $25,000 property damage limit.
Dangers of State Minimum Limits
Unfortunately, these minimum levels of protection are what some insurance companies quote when trying to win new clients. Consider an example of an Alabama driver carrying only minimum limits on their auto insurance policy. Should they be at fault for an auto accident, any injury to a person requiring over $25,000 of compensation would be the responsibly of the client. Even for minor injuries it is not difficult for medical bills, lost wages, and court-mandated damages for pain/suffering to exceed that amount over the lifetime of the injury.
Always question when an insurance company quotes low auto insurance limits, whether they be the state minimum limits or otherwise. Why wouldn’t they quote limits that are more helpful? Some insurance companies prefer state minimum insurance limits because it means less risk for them. Should their client be involved in an expensive accident, they will simply pay the policy limits and leave the client on the hook for the rest. Another common reason is to keep pricing low to win new clients. Either way, anyone automatically quoting state minimum limits probably does not have their client’s best interests at heart.
What are adequate limits?
Before we provide a recommendation, consider what you have at risk. Each person has different assets to protect such as a home, finances, investments, and savings. Without adequate insurance limits, courts can require at-fault parties to liquidate assets to pay for their liability in an auto accident. Also consider where you drive and how often. If often driving in urban high density areas, consider higher limits. Lastly, decide whether your strategy is to insure for a severe accident, a worst-case scenario, or somewhere in between.
Bankers Insurance recommends our clients carry at least $500,000 in auto liability insurance as a combined single limit. In addition, we recommend our clients consider adding personal umbrella insurance on top of it. This does not mean claims can’t be higher – we’ve seen auto accident claims as large as $2,400,000 – so each client needs to carefully consider their options and ensure they carry adequate protection. Choosing auto liability limits is the responsibility of each client and increasing limits on an auto insurance policy costs surprisingly less than one might imagine.
Questions on your car insurance policy? These policies vary, so read it carefully or contact your Bankers Insurance agent. We will help determine your risks and advise how to best cover them. Not a client of ours? Let us earn your business! Each of our clients is assigned a personal insurance agent and provided a phone number that rings right on their desk.