Sure, you're a responsible driver. But is your state-minimum, bare bones auto insurance coverage really sufficient to cover your risks?
Yes, every state imposes a minimum on liability insurance coverage. This coverage not only protects you against having creditors forcibly seize your assets and land you in bankruptcy court; it also helps protect others around you, by ensuring that no matter what their medical issue or damages, there is enough liquidity on the table to make sure they are economically protected.
But state minimums aren't designed for most individuals, especially the affluent and do not provide them with the real protection they need. State legislatures must set liability minimums low enough so that insurance coverage is affordable even for poor families - so at least they'll get something rather than drive completely uninsured. State minimums are not designed to provide really adequate protection for drivers who have assets or make a decent income and are those who are targets for legal action.
The Owner is At Risk
Remember, even if you lent your car to someone else for the weekend - if he or she crashes it, and causes damage, it's you, as the car owner, who is ultimately responsible. Owners are first in line, ahead of drivers, when plaintiffs' lawyers start looking to collect on damages not covered by auto insurance.
How Big Can Judgments Be?
Judgments for damages in auto accidents are very frequently $50,000 and over and can range into the millions. We looked at actual judgments obtained by just one small law firm in Las Vegas, Nevada, and found instances like these:
- $200,000 in liability for just one accident involving a motorcycle.
- $265,000 for a T-bone auto accident.
- $300,000 for a leg injury to a pedestrian.
- $750,000 for a rear end accident with injury.
- $2,000,000 for another rear-end accident with serious injury.
- 2,900,000 for a wrongful death claim.
Your state-mandated minimum of $15,000 to $100,000 per accident should cover most fenderbenders, but it is woefully inadequate for the real risk. If you are sued, and the plaintiff wins, you will be held responsible for the whole judgment over the amount of your coverage.
If someone involved in an accident sues you and wins, he will receive a payment from your insurance company, up to the limit of coverage. When the payment is inadequate, they may take additional action. They may sue to seize your personal assets - your bank account, your vehicles, property, business and even your home in some jurisdictions. They may also file to garnish your wages. The fallout could easily force you into bankruptcy - and severely disrupt your life.
If you have any kind of hard-earned assets that are at risk of creditor action, you may want to consider buying extra liability coverage. The more assets you have, the more likely you are to be targeted. After all, plaintiffs' lawyers know that judgments are easier to collect from the affluent than the poor. But even middle class people have a lot to lose by carrying inadequate liability insurance coverage.
You may consider two kinds of insurance: additional liability insurance for your car, over and above the state-mandated minimum, and umbrella coverage, which helps protect your assets against losses from a wider variety of sources. This can be especially important for parents of teenagers who are risky drivers and who may drive someone else's car, or have a party at the house while you and other adults are out of town. When a youngster leaves the party at your house after drinking, and has a wreck, you could be held liable.
To assess your exposure, sit down with a licensed insurance professional, your attorney, or both. It's easy to tailor a remarkably affordable plan to provide more realistic protection against the actual risks of liability - but you have to do it before the accident.