Understanding Auto Insurance Liability Coverage

 

Liability Limits

This blog post is going to be focused on Texas auto insurance – but a lot of the core principles remain the same for most states. When in doubt, feel free to reach out to us, as we are more than happy to answer questions about insurance.

Auto insurance is pretty simple; liability, comprehensive, collision and medical coverage.  There are always extras you can get, but we will focus on the core coverage for now, and this blog post is specifically about liability coverage.

Liability to others; this is the first and most basic coverage available to you. Texas state minimum coverage is 30/60/25. These three numbers mean $30,000 in bodily injury liability per person, $60,000 per accident, and $25,000 in property damage to others. We certainly don’t recommend you carry such low limits at all. “Why should I carry higher liability limits” you ask? If you are driving your car around most big cities in Texas (Dallas, Austin, Houston) you are going to see luxury cars and expensive trucks, which are more expensive than that $25,000 in property damage coverage you carry. I

What you won’t see are the lawyers that are waiting to sue you if you are at fault in an accident.

The first number, $30,000 is a hard limit on the amount of bodily injury the company will pay per person. That’s not a tremendous amount, if you have a bad accident. That’s where that lawyer will come in. The insurance company isn’t going to pay any more, so you will be on the hook for that money.

Instead of carrying the state mandated minimums, we always recommend carrying high limits – for a couple of reasons. The first reason, obviously, is so you have the proper protection if you hit that luxury car, or are found at fault in an accident with lots of bodily injury. Most of our clients carry limits of $250/500/100; $250,000 per person in bodily injury, $500,000 per accident. Those numbers should give you a lot more peace of mind. In addition to peace of mind, carrying high limits gets you the best rates. Insurance companies want to insure people who carry more than the state minimum. Not because it’s more expensive, but because it shows that they are a better risk. Right now, insurance is all statistics, and the statistics say that folks who carry high limits cost the insurance companies less in the long run.

You can certainly supplement your liability coverage with an umbrella, as many of our clients do, but that’s a subject for another blog post.