Legally Liable:
Auto insurance will typically include liability coverage for both bodily injury and property damage for which you, the policyholder, are found legally liable. In other words, liability protection is your first line of defense
which pays for injuries and damage sustained by another driver or passenger in an auto accident for which you are responsible.BI - Bodily Injury:
If you cause an accident and someone is injured, your automobile liability coverage will pay for their injuries, but only up the stated limits. Policies with split limits of liability provide separate limits of insurance coverage for each injured person and the amount of coverage available for a single accident. Limits are the maximum your insurance company will pay under terms of your policy. For example, an insurance policy with split limits of 100/300/100 means $100,000 is the maximum amount payable for the bodily injury of any single person; $300,000 is the maximum payable per accident (the third number is the property damage limit).
Other insurance policies may have a combined single limit ($300,000 for example). Combined single-limit policies offer a single amount which is the maximum amount payable for the total cost of bodily injury and property damage.
PD - Property Damage:
If you at fault in an accident and someone else's property is damaged, your auto insurance liability coverage will pay for the damage up to the stated limits. Damaged property often involves the other driver's vehicle. However, property damage insurance coverage will also pay for damage to other types of property, such as a mailboxes, a telephone pole or a house.
In insurance policies with split limits (100/300/100), the third number indicates the maximum amount payable by the policy for property damage per accident. In the example, your policy would provide $100,000 worth of coverage. Combined single-limit policies offer a single amount that is the maximum amount payable by the insurance policy for bodily injury and property damage.
State Minimums
Some states, like Missouri, require drivers to carry a minimum amount of liability insurance for property damage. Proof of compliance with the state minimum may need to be shown at licensing or in case of a traffic stop or accident. The philosophy is that each driver must be prepared to shoulder the responsibility for any damages to persons or property caused by his or her actions behind the wheel. In Missouri these legal minimum limits are 25/50/25, but is this enough coverage?
Just as it is difficult to predict when, where or why an accident may take place it is also difficult to tell what the dollar amount of liability you, the driver, may be required to cover in an at-fault accident. Higher medical costs and legal settlement limits point to the inadequacy of the state's requirements. In the event of a tragic accident involving loss of life or limb the cost assessed to an at fault driver is certain to exceed $25,000. When your insurance company pays out the full limit as specified in your policy, you the driver will be responsible for any excess costs and a court may seize any present and future assets to satisfy the debt. For this reason higher limits of liability insurance coverage are always recommended.
Does Lower Liability Save You Money?
In an effort to lower their monthly premium some insured buy the lowest liability limits available or required by law. While this strategy will lower premium, often the savings are small and they are always dwarfed by the risk involved. A better strategy may be to raise the deductible on your comp an collision coverage. Why? Because the risk is relatively less. The difference between a $250 and $500 deductible involves and extra risk of only $250 out of pocket. In liability terms, the risk between 25/50/25 and 50/100/50 limits is a risk of between $25,000 and $50,000 out of pocket. And often the added premium of higher liability limits can be offset completely by raising your deductible on comp and collision.
If you are unsure about your current liability limits, check your policy or call your agent. To learn how some simple adjustments in your coverage may protect you better for little or no extra cost contact Crawford-Butz for a free proposal. Just call 314 752-2500 and ask for Larry. I'm ready to help.
