Liability Coverage Amount – How Much Is Enough?

Liability Coverage Amount – How Much Is Enough FAQ

Choosing your auto liability coverage amounts are an important decision, so that’s why we are providing this essential information.  At Farmers, we want to make it easy for you to understand your insurance options, this way you can make an informed decision on the way you should protect yourself from financial risk.

So what exactly is liability coverage? Liability coverage pays for the injuries or damages to other people or their property caused by you or someone driving your vehicle.  The two liability coverage amount types are Bodily Injury Liability and Property Damage Liability and every state has different laws dictating the minimum coverage you must carry for this.  So let’s walk through a brief example, it will help you to better understand the importance of selecting the appropriate liability coverage amount.  Let’s say you have an accident, you were distracted momentarily and rear-ended the Lexus in front of you.  There are four people in the car and all of who suffer some injuries, and for discussion purposes, we’ll imagine you live in Los Angeles and have the California minimum coverage levels in place of $15,000, $30,000 and $5,000.  This means your insurance company would cover the cost of any one person’s injuries, rehabilitation expenses, pain and suffering and time lost from work up to $15,000, but they would not pay more than $30,000 for the accident, regardless of how many people were injured.  This is the bodily injury portion of liability insurance, and your insurance company would also pay up to $5,000 for the property damage.

So now, let’s take a look at how your coverage would apply.  There are four people injured and the cost to cover their injuries totaled $89,000, and the damage to their vehicle was $13,000.  So, in reviewing your liability coverage amounts you will see that your policy would pay $30,000 for all injuries and $5,000 for the property damage.  So where does the remaining $59,000 for bodily injury and $8,000 for property damage come from?  Well, once your policy pays the maximum limits, you could be held personally responsible for the remaining amount.  In this example, this would mean that you would be responsible for paying a total of $67,000 out of your own pocket.  So this is why it is so important that you consider carrying more than the state minimum coverage amounts.  After all, it’s not difficult to see how a simple fender bender like this could end up costing you tens of thousands of dollars if you maintain the minimum coverage levels.

Call us today at 480-491-8585 if you are in Arizona or California to learn more about how we can show you the liability coverages amounts available that will help protect you from this financial risk!


* Disclaimer – Please check with your insurance agent as coverages are different between states and insurance companies.

Topic: Liability Coverage Amount