Did you consider what might happen to your practice when you purchased your most recent auto insurance policy? That's right–auto insurance! Every time you back out of your garage, you're putting your business and personal assets at risk if you're involved in an accident that's your fault and you only have the state minimum insurance limits.
Posted in Personal Insurance on Friday, September 22, 2017
Most people don’t give the risk of a lawsuit a second thought. But with liability lawsuits on the rise and attorneys seeking larger awards all the time, the risk is very real.
The purpose of auto insurance is to protect drivers and their passengers from financial hardship after an accident. Each state requires drivers to prove they can pay damages in the event of an accident. This is called proving financial responsibility. The easiest way to meet this responsibility is to have auto insurance.
Why You Need Higher Liability Limits
Each state sets a minimum requirement for the amount of liability insurance you must carry. In many incidences, these minimum requirements simply aren’t adequate to protect you and your assets. Here’s why you should consider purchasing higher liability limits on your auto policy.
Iowa, for example, requires auto owners to carry a minimum 20/40/15 liability package. If you’re involved in a serious accident, it’s highly likely that an individual’s medical expenses could exceed $20,000, or a group’s medical expenses could total more than $40,000. In addition, $15,000 for car repairs or replacement isn’t nearly enough, considering that the average price of a new car or truck sold in the United States in April 2017 was more than $33,000, according to leading auto researcher Kelley Blue Book.
You are on the hook personally when expenses exceed your coverage limits when you’re at fault for an accident. And this means that your personal assets, including your business, are at risk and can be seized to pay for damages and medical care. Even the top liability limit of $500,000 may not be enough in some cases. If you think you need more insurance coverage than $500,000, you should consider an umbrella policy. These come in $1 million increments.
Another thing to consider is that your financial responsibility resulting from an accident doesn’t end with the initial insurance payout. If you’re at fault in an accident and your insurance isn’t adequate to cover the victim’s personal property damages and medical expenses, you can be sued for the following:
- Future livelihood and earnings potential. This means you could be making large settlement payments for years or the rest of your life.
- Future potential assets. For example, if you stand to inherit a large sum of money or property, you can be sued for those assets once you receive them to help pay the claim expenses.
Choose With Confidence
Car insurance isn’t a one-size-fits-all proposition. Many insurance professionals typically recommend carrying no less than $300,000 bodily injury protection and $100,000 property damage protection. Base your decision about what to purchase on:
- Personal assets. The more valuable your assets, the more protection you need. A good rule of thumb: Make sure you’re covered for an amount at least equal to the total value of your assets. (Add up the dollar values of your house, personal property, business, car, savings and investments.)
- Your budget. Buy what you can reasonably afford. Why risk not being able to pay your premiums, which can lead to a policy cancellation and lapse of coverage.
- How much risk you can handle. If you’re comfortable paying more out of pocket in the event of a large claim, you may be fine with higher deductibles and/or lower limits.
Determining exactly what your auto insurance should cover and how much you should pay for it can be tricky and confusing. NCMIC can help.
Talk to one of our agents to help you decide whether your current auto insurance policy provides enough coverage or if it’s time to increase your liability limits. Our agents can also help with all of your other personal and commercial insurance policies and help you make the right insurance choices. To learn more or speak with an agent today, call 800-769-2000, ext. 8180.