AUTO INSURANCE: ARE YOU COVERED? A legal series on automobile insurance coverage

4/6/2009

Liability Policy Limits: Do You Know Your Limits?

By: Kate G. Westad, Personal Injury Attorney at Lommen Abdo Law Firm

Do you know what your liability policy limits are on your automobile insurance policy? Most of us just look at the price tag of automobile insurance premiums and give little thought to how much financial protection you are actually affording yourself and your family. But even in tough economic times, automobile insurance coverage is not something to skimp on. Too little liability insurance coverage can put your personal assets and creditworthiness at unnecessary risk. That is why it is important to have a competent insurance agent who can walk you through the process of selecting adequate insurance coverage. This way you can make coverage choices that are best suited to your insurance needs and to protect yourself and your family against personal liability.

To begin with, you must understand what your automobile liability insurance limits are in order to understand if you are properly insured. It is very common that people do not know what their liability insurance limits are, let alone what they mean.

Let’s get down to basics. Automobile liability insurance limits are the maximum amounts of insurance that your insurance company will pay to an injured party in the event you are at fault for an automobile collision. When an insurance company issues a policy - the first page of the policy is the Declarations or “Dec” page. When reviewing your Dec page, scan for the liability limits (a/k/a bodily injury limits). For example, your Dec page may say you have liability insurance limits of “100/300.” If you are the at-fault driver in a collision, the first number means that there is a maximum of $100,000 in coverage per person injured in any one auto collision and the second number means that there is a maximum of $300,000 in coverage for any and all persons injured in any one auto collision.

Here’s how you can be exposed to personal liability if you cause a collision which results in injury. Based on coverage limits of “100/300,” and an injured person’s claim is $300,000 - or $200,000 over your $100,000 policy limits - that personal injury claimant can go after your personal assets and/or obtain a personal judgment against you for the remaining $200,000. Limits of “100/300,” can easily be exhausted by an injured party in a serious collision. Injury claims are generally comprised of past and future medical expenses, wage loss as well as pain and suffering. Medical expenses can quickly add up. For example, serious injuries which require surgery and a hospital stay can easily result in hospital and medical bills totaling $100,000 or more. This leaves little insurance coverage for the injured party’s other claims, such as pain and suffering or lost wages.

Further, what if you accidently hit a family of four? If all four people are injured in the collision and the collective claims of those four people total over $400,000 - based on coverage limits of “100/300,” the most these four injured people can recover altogether from your insurance policy is $300,000. This could leave you personally liable for the remaining $100,000.

As you can see, without proper insurance limits, you could be placed at substantial financial risk. These scenarios are scary - and very real. One of the basic steps of obtaining automobile insurance is determining your assets and financial worth. Your insurance is meant to protect what could be lost in the event of a lawsuit. If you work in a profession which has a higher income, injured parties are also more likely to pursue personal judgments against you in excess of your insurance limits - because it is likely you will have the ability to pay the judgment, even if at a later date. Personal judgments just don’t go away either - in Minnesota judgments are valid for ten years - and can be renewed at the end of each ten year period.

As a personal injury attorney, I see time and time again when at-fault drivers do not have adequate liability insurance limits to cover injured parties’ claims. If you are the at-fault driver and you do not have adequate coverage, there is always the risk of having a personal judgment against you which can then be collected against your assets and/or affect your creditworthiness. In several instances, I have witnessed at-fault drivers reach into their own pockets to pay an injured party because they were not willing, or did not have the foresight, to obtain adequate automobile liability insurance coverage.

Pursuant to Minnesota law, the minimum mandatory automobile liability coverage limits are “30/60" or a maximum of $30,000 per person and $60,000 per collision. My personal and practical opinion is that these liability limits are so low, that you should almost always opt for higher coverage. As seen above, even limits of “100/300,” can easily be exhausted. When considering higher liability limits you should certainly consider obtaining an umbrella policy as well. Umbrella coverage provides an additional layer of protection and can be less expensive than merely raising the limits on each of your auto or homeowners insurance policies separately.

Also, do you have teenage or college-age drivers? It is no secret that younger, more inexperienced drivers are at a higher risk for collisions. Remember, when a collision occurs, Minnesota law specifically allows lawsuits to be brought not only against the at-fault driver, but also against the owner of the vehicle involved in the collision.

Bottom line - get a competent insurance agent and make it a habit to review your automobile insurance coverage and your liability limits on an annual basis. This will ensure that you have the financial protection you and your family need.




More articles in Kate Westad’s “Are you Covered?” series will appear on www.womeninjurylawyers.com in upcoming months. Questions about personal injury claims? Contact Kate Westad at kate@lommen.com.