Why Take Out Higher Auto Liability Insurance Coverage Than Your State Minimum?

Most states require drivers to have liability insurance coverage. This insurance covers claims if you injure someone or damage their property in your car.

While every state has its own minimum limits, you can choose to buy more coverage. Why is this a good idea?

Minimum Limits Don't Always Cover Claim Costs

While you might get some peace of mind by having minimum-limit liability insurance, don't assume that your insurance will always cover your costs. Damage claims can have a high financial value; some states have low limits that won't match these costs.

If your policy limit is lower than the claim costs, then you have to find the shortfall. For example, let's say that your state has a minimum limit of $20,000 per person for a bodily injury claim. If you take out insurance at this minimum rate, then your insurance company will only pay up to this amount.

If you have an accident and the injured person can prove that their injury costs a total of $30,000, then you have to find the excess. If your insurer will only pay $20,000, then you have to pay the other $10,000.

So, it makes sense to boost your coverage to make it more realistic. This is especially important if your state has a low minimum rate that is unlikely to cover average injury and damage costs.

Minimum Limits Put Your Assets at Risk

All drivers should assess how a claim might affect their assets if their insurance doesn't cover all their claim costs. If you have valuable assets, then these can be seized to pay your part of a liability claim.

If you don't have any significant assets, then this might not be a concern. However, if you own your home, any property, other vehicles, or valuable items, then you should protect them by increasing your coverage. If you don't, then you could lose them.

The more coverage you have, the less likely it will be that you will have to lose assets to pay excess parts of a claim. Alternatively, you can take out umbrella insurance or extra personal liability coverage to cover shortfall gaps. In either case, additional protection will be useful if you do ever have to deal with a bodily injury or damage liability claim.

To get advice on how much auto liability insurance coverage you really need and how to manage your coverage, talk to car insurance companies or brokers.