Is the Minimum Required Liability Insurance Enough?

Minimum Liability InsuranceThe most basic part of auto insurance, and the part generally required by the government of the state where you live, is the liability coverage that pays for bodily injury and property damage if you injure people or destroy their property in a traffic accident where you are at fault.

When you see those liability minimums expressed in print, they'll usually say something like "25/50/25," which means your insurance company will pay up to $25,000 if one person is injured or killed, $50,000 if there is a claim from more than one person, and up to $25,000 to cover property damage.

While most states have minimum requirements for the liability insurance, having only the minimum is not enough for all people in all situations. How do you know whether or not you have enough coverage? There are several points to consider:

  • Learn the minimum car insurance liability limits required in your state. They're usually available on the web page for your state's Department of Motor Vehicles, but your insurance company or agent will have this information, as well. It's their job, after all.
  • Calculate your assets. Insurance exists to protect you from losing anything in a lawsuit, so remember that "assets" doesn't mean just mean "cash." If you own a business, a home, a boat, or expensive art work or computer equipment, you will probably need more than the minimum liability coverage required by your state in order to be adequately protected. If you have significant assets, however, you may want to consider a personal umbrella policy, rather than merely maxing out your liability insurance.
  • Think about what you do for a living. If you have a very risky profession (astronaut, test pilot, race car driver, or work on an oil rig) or a very public profession (politics, performing arts, corporate spokesperson for your own business) people will assume you have a high salary, so you may want to boost the liability coverage on your car insurance to protect that perceived income. Also, if you do a lot of driving for work, your employer may require extra liability coverage.
  • Consider the ages of the drivers in your family. Teenagers are more accident prone than middle-aged adults, so increasing liability is a good idea, especially since you're responsible for your teenager until they finish school, even if they have insurance in their own name. Likewise, senior citizens are more likely than slightly younger counterparts to get into accidents.
  • Determine the value of the cars you own - or the other cars on the road. $25,000, a fairly common property damage coverage amount, may seem like a lot until you realize that many of the cars you see on the road - and probably even your own car - would cost much more than that to replace.
  • Remember that an accident may include more than just two cars. If you cause a crash where the car you hit is pushed into another car, your liability exposure just doubled.

If all of these scenarios have you feeling worried or scared, take a minute to take a deep breath. Increasing your liability coverage will protect your assets in most of these situations, and won't impact your insurance premium all that greatly. Remember that the cheapest insurance you can buy isn't necessarily the best policy for you, and spending a little more now is likely to be considerably less expensive in the long run.