I Have Full Coverage (or Do I?)

“I have full coverage.”  I cannot tell you how many times I have heard that from clients who have been involved in a vehicle collision.  However, most of the time, the client is either not insured for the type of harm or damage caused in the collision or the policy limits (maximum amount the insurance company will pay) for the category of insurance needed to protect the client are woefully inadequate.

Of course, it’s not the client’s fault. The insurance underwriters and sales representatives sell insurance to people based upon the risk presented by that particular person. That is to say, most insurance that is sold to consumers is sold to maximize insurance profits, while limiting the insurer’s risk.  Keep the premiums high and the potential pay-outs low.  To accomplish this, the insurers assess the risk posed by the individual applying for insurance and make their recommendations for insurance coverage accordingly.

Here is what you need to know about “Liability” insurance coverage:

Liability Insurance: Liability coverage is insurance that protects (indemnifies) you if you hit someone and cause them personal injuries.  If a claim is made against you or you get sued by someone claiming personal injury, this category of insurance is meant to pay for that claim (and the attorneys to represent you) so that you don’t have to.  The minimum protection you can have in California is $15,000.00.  However, that is almost never enough.  Just an Emergency Room visit can cost well in excess of $15,000.00 and that does not even contemplate further medical treatment, lost wages, and general damages (ie pain and suffering) that may be claimed by the injured party.  If you are only insured to $15,000.00 and the value of the claim is greater than that amount, you are personally liable for payment of compensation in excess of the policy limits.  The insurer will pay the $15,000.00 and you will have to pay the rest.

Recommended: You should have a minimum of $50,000.00 (Fifty thousand dollars) of liability coverage.  If you can afford it, get $100,000.00 liability limits or even $500,000.00.  The increase in your yearly premium will be very small, maybe only $8.34 extra per month ($100.00 per year), and the added protection is well worth it.  Ask your insurance representative how much the additional coverage will cost for each of the above policy limits.  Then get as much coverage as you can afford.

Important: In most instances, your liability limits are also your Uninsured Motorist policy limits, as well.  This is the insurance that compensates you if someone causes you personal injuries in a auto collision and has no liability insurance or does not have enough liability insurance to compensate you for your injuries (remember the $15,000.00 minimum limits discussed above?).  Unfortunately, the odds of being hit by an uninsured vehicle are high.   The odds of being hit by and under-insured vehicle are even greater. Why take the chance that you will not be fully compensated for your injuries by having low Uninsured Motorist limits?  Again, the increase in premium is very slight compared to the added protection you will receive.

Bottom Line: Be smart. Make sure your Liability/Uninsured Motorist coverage is as high as your budget will allow.