“When you pay too little, you sometimes lose everything because the thing you bought was incapable of doing the thing it was bought to do. The common law of business prohibits paying a little and getting a lot – it cannot be done.” – Unknown
Do you know what liability limits you carry on your personal auto policy? Everyone is mandated by state law to carry liability insurance when driving a vehicle; however, few people know how much liability insurance they have or how much is enough.
Both producer and consumer are to blame for this issue – as it is both a lack of explaining by the producer and a lack of wantingto understand by the consumer. The culture, processes and procedures of our industry play a large role in this problem as well. Many consumers want an ‘apples to apples’ quote – and all too many producers are willing to fulfill that desire. Many producers assume that the current or prior producer did his due diligence and that the liability limits on that customer’s personal auto policy are sufficient – a terrible assumption to make.
The primary responsibility – in my opinion – falls on the producer in this situation. They have a fiduciary duty to act in the best interests of the client. A knowledgeable, responsible producer should take the time and resources to determine what liability limits are appropriate for each customer and not take a ‘one size fits all’ approach. The secondary responsibility is on the customer to listen and understand their coverage and be open to the suggestions of their insurance producer – realizing that cheapest may not be the best and that with liability insurance, you get what you pay for!
A separate blog post will define in detail liability coverage on a personal auto policy; however, it basically provides coverage if you were sued for damages (bodily injury and property damage) that you are liable for causing. How much coverage do you need!? Simply, as health care costs continue to increase, the need for higher insurance limits rise as well. If you are liable for causing bodily injury, the injured party will incur health care costs that you are responsible for – it’s as simple as that. The liability coverage afforded under your personal auto always has a per occurrence limit – this caps the amount the insurance company will pay for any one incident. This limit should be enough to cover the majority of your personal assets. If you are sued and your liability limits are exhausted – you could be personally sued for the remainder of the settlement, which puts your personal assets at risk. In addition to damages, you’ll also be responsible for defense and legal costs – which can add up quickly.
An easy and cost effective way to protect your personal assets is to purchase a personal umbrella policy – which we always recommend.
Be sure to review your insurance policies at least once a year to evaluate whether or not you are properly insured. It is critical that you listen to the advice of the insurance producer and tailor coverage to your specific needs.