How Much Liability Coverage Do You Need to Protect Your Assets?

How Much Liability Coverage Do You Need to Protect Your Assets?

Red wax stamped with How Much Coverage Do I Need in gold text San Tan AZWhen it comes to insurance policies, there is no one-size-fits-all option. Every policy includes a variety of options, with the policyholder choosing the liability coverage types and limits according to his or her needs.

The average Arizona auto policy includes liability, collision and comprehensive, underinsured/uninsured motorist, and personal injury protection. Of course, coverage amounts vary, as do add-ons such as rental and glass coverage. Determining your coverage needs requires understanding your available options.

Should I Have More than Minimum Coverage?

Unless you own your car outright, said car has little value, and you have no other assets, you almost always need more coverage than the minimum required by Arizona state law.

If you have an accident and the other driver sues you, owning zero assets typically protects you from any judgment levied against you after an accident. In this instance, “assets” means savings (both liquid and long-term, such as retirement accounts), jewelry, vehicles, a home, or any other items of material value. However, if you have any assets at all and are responsible for an accident, you risk losing those assets without adequate auto insurance coverage.

In Arizona, minimum coverage is liability only. If you owe money on your vehicle, you must carry additional coverage, as liability insurance does not reimburse any repairs to your car. It only covers the other driver’s property and bodily injuries.

Liability Coverage Examples

Insurance coverage amounts typically look like this: #/#/#.

The first number is the maximum amount paid per person for any injuries sustained in an accident. The second number is the maximum amount paid for all injuries sustained in an accident. The third number is the maximum amount paid for property damage sustained by the other driver. Sample liability coverage amounts include:

  • 50/100/50: Recommended for those with few assets and an older vehicle.
  • 100/300/100: Recommended for typical mid-level income clients with some assets, such as a home and personal savings.
  • 250/500/100: Recommended for clients with more expensive homes, newer vehicles, and more substantial savings. In addition, adding an umbrella policy further protects your assets.

Property Damage and Bodily Injury

These coverages include repairing or replacing damaged property, as well as medical care, including hospitalization, for injuries sustained in an accident.

One of the things to remember when determining liability coverage limits is that they apply to the other driver (and his or her passengers), not your vehicle, yourself, or passengers. So, while your vehicle may be of relatively low value, if the other driver has a newer vehicle, you face tens of thousands of dollars in repair or replacement costs. If anyone is injured in the accident, you may face significant medical costs, depending on the injuries sustained. In addition, extensive injuries may result in lost wages and lost earnings claims. These become substantial with younger drivers who have many years of earning power ahead of them.

Uninsured/Underinsured Motorist Coverage

This coverage protects you against drivers with either inadequate insurance coverage or none at all. Of course, Arizona law requires drivers to carry auto insurance, but some drivers choose to break this law. Even if the other driver carries insurance, if he or she carries only the minimum amount required by law, this may leave you paying for your own vehicle repairs and/or medical bills after an accident.

You may also need your uninsured/underinsured coverage if you are the victim of a hit and run accident, either while driving a vehicle or as a pedestrian.

Uninsured/underinsured coverage options mimic those of liability insurance, and most insurers recommend their clients carry the highest level of coverage they can afford, especially if you drive a newer or expensive vehicle. If you are the primary breadwinner in your family, this coverage becomes even more important.

Finally, Arizona is a tort state, meaning insurance companies pay out according to who is at fault in an accident. This increases your vulnerability in the event you have an accident with a driver who doesn’t have adequate insurance coverage.

Personal Injury Protection

In the event of an accident , personal injury protection (PIP) ensures coverage for medical costs and often funerals. If you do not have health insurance, or your health insurance policy includes high deductibles or minimal coverage, PIP offers essential protections for you and/or your passengers.

The Benefits of Umbrella Policies

Umbrella policies start at $1 million in coverage, typically increasing in increments of $1 million. These policies cover damages in excess of the maximum limits on your auto policy, and generally do not break coverage limits into property damage and personal injury. Umbrella policies go a long way toward protecting your assets while remaining highly affordable. On average, a $1 million umbrella policy costs you around $1 per day. If you have substantial savings, an expensive car or home, or any other significant assets, you probably want an umbrella policy.

Most insurers require policyholders to carry the maximum coverage amounts on their liability policy before purchasing an umbrella policy.

The two main benefits of an umbrella policy are:Black Umbrella San Tan Insurance

  • Coverage in multi-vehicle accidents: Accidents involving multiple cars and/or personal injuries do not negate the cap on your liability coverage. If your liability max is $100,000 and you are deemed at fault in a multi-car accident, it is highly unlikely your policy limits will cover that level of damage.
  • Lost income/lost future earnings: Substantial injuries may result in significant lost income and may even reduce the future earning potential of an accident victim. Surgeries, physical therapy, and rehabilitation significantly impact wages. Lost limbs, nerve damage, and more may even end someone’s career.

Talk to Your Agent

The goal of insurance is protecting your assets, not simply meeting the minimum coverage required by law. With so many variables, the best person to advise you on your coverage needs is your insurance agent. Create an inventory of your assets, including vehicles, homes, jewelry, and any other items of value, to ensure you know exactly how much you have to protect.

To learn more, contact the team at San Tan Insurance for a free quote.

No comments yet.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.