How Much Liability Coverage Should I Carry

The liability portion of your auto policy is the most important part of your auto coverages. By being liable, this means; obligated by law to pay, having caused an accident and is liable to pay, the condition of being liable, a condition that acts against one.

Many people in an effort to reduce auto premiums, choose the lowest liability limits available by state insurance laws. Actually, the liability cost associated with an automobile policy are the most affordable. Liability cost are basically the same, whether you insure a brand new car or one that is twenty years old. Cost factors drastically decrease with increased liability limits. Lets take a look at exactly what is covered under the liability portion of your auto policy.

Liability Property Damage (PD)

Property damage is simply the amount of damage resulting from an accident or collision to another persons property in which you are at fault. The types of damage could result from a collision with another automobile, running your car into someone's home, hitting your neighbors fence or mailbox when turning into your driveway, etc.

So how much liability should you carry?  

A general rule of thumb is that you can not have enough liability coverage. Lets look at a couple of examples of being under insured. Most all state insurance regulators require policy holders to have a minimum of twenty-five thousand dollars in property damage coverages. The old state limits were ten thousand dollars, resulting in many to be under insured.

The amount of property damage one carries is the maximum amount the insurance company will pay in the event that you the policyholder inflicts damage to another's property. Take for instance, that you are involved in an accident, in which you are found at fault. For illustration purposes, lets assume that your auto liability limit is twenty-five thousand dollars. Lets say you collided with a fifty thousand dollar SUV, causing thirty-five thousand dollars in property damage to the vehicle. You guessed it....You are responsible for damages over your liability limits. For a few dollars more you could have increased your property damage liability limits to fifty or one hundred thousand dollars.

Fifty thousand dollar property damage liability is usually more than sufficient. Most people who carry extremely high liability limits are those that operate a vehicle that is used for business purposed. These type of auto policies are referred to as commercial auto.

Note: If you use your vehicle for business purposes and or have a sign on the vehicle that implicates business use, you will need to purchase a commercial auto policy. The liability exposure in much more for businesses compared to personal use. Insurance companies can deny a claim if a business auto is insured under a personal auto policy.

Bodily Injury Liability (BI)

The second part of your liability coverage is referred to as bodily injury. This is the amount paid for bodily injury resulting in an accident in which you the policyholder are found at fault. Bodily injury pays a maximum amount per person or a maximum amount for all occupants involved in any one accident.

Bodily Injury coverages and amounts

You will notice that liability coverages appear as 25/50/25 or 50/100/50 or 100/300/100. You need to understand exactly what these numbers refer to. I'll use the first example, as this will apply to all.

The first set of numbers 25/50 refers to bodily injury. This means that your insurance company will pay up to twenty-five thousand dollars per person, not to exceed a total of fifty thousand dollars for all involved in an accident. The last number in 25/50/25 refers to property damage.

The importance of liability

The responsibility of operating a vehicle and being properly insured, rest on you the policyholder. Although you can not put a dollar amount on a persons life or disability injury, you can insure that you are properly insured by carrying adequate amounts of liability coverages.