Auto Liability Insurance Advice

Auto liability insurance coverage, also known as car liability insurance, is a type of vehicle insurance that is designed to protect you financially should you ever be involved in a car accident.

If you have auto liability insurance, then that will cover you for third-party liability. This includes damage you cause to other people, other people’s property and also extends to providing coverage for your defense and any other legal fees should you get taken to court.

Without having such coverage, you will have to pay for any fees resulting from your accident by yourself. As you might imagine, this could prove to be very costly and is not something that most people can afford to do.

This is why having vehicle insurance is required by law in most countries of the world, as it helps to minimize the financial costs of vehicle damage and road accidents.

Vehicle Insurance Buying Mistakes

Whilst it is a legal requirement that you insure your vehicle on the road, it is not a legal requirement to take out coverage beyond a basic policy.

What this means is that if you want to be fully insured on the road, you have to determine how much you want to insure yourself for and what types of risks you want to insure yourself against.

Since there are many different types of insurance policies to choose from, it can be quite difficult for the novice driver to know which policy they require and which policies they will gain the most benefit from.

This can cause people to make mistakes when buying car liability insurance, the two most common of which are listed below.

1) Not Buying Enough Car Insurance

The amount of liability insurance you should buy varies depending on how suable you are and the type of person you hit.

These factors are discussed in more detail later on in this article, although the important point to remember is that different drivers will need to insure themselves against different types of road and vehicle risks.

What these risks are can vary depending on many factors. But the best way to make sure that you are adequately covered is to speak with your insurance agent about the different types of coverage policies they offer.

Once you know what types of coverages there are, you will then be able to make a more accurate determination as to the types of risks you feel you would benefit from protecting yourself against when driving on the road.

2) Buying Inconsistent Limits

Being consistent with insurance means having a balanced coverage plan. For example, if you have a $100,000 limit on your car, but at the same time have a $300,000 limit on your home and a $50,000 limit on your boat, then you are not evenly protected against risk.

Again, this will be discussed in more detail later on, but the main point to take away from this is that you never know what will happen to you in the future. Therefore, having strong insurance policies covering only a few risk areas is like putting all your eggs in one basket.

If something were to happen to you which involved you having to pay a lot of money for something you were not adequately insured against, then that money is going to come out of your pocket and not from your insurance companies pocket.

Now that you are aware of the two main mistakes that people make with auto liability insurance, below we will look at how these factors specifically relate to the type of coverage plan that you take out.

Insuring Yourself Against Being Sued

Believe it or not, how much money you make and how much you are worth overall can affect how much you are sued for if you are ever involved in a car accident.

Generally speaking, the more you are worth the more the other person will try to get from you in a court settlement, and so the higher your automobile liability limits should be to protect against this.

The most obvious factors which can affect how much you are sued for include:

• Your current income
• Your current assets
• Your future income
• Your future assets

Whilst you may be aware that you could be sued for more if you are currently wealthy, don’t overlook the possibility of being sued if you are likely to become wealthy, or wealthier, in the future.

For example, if you are undertaking some professional training, such as training to be a doctor or a lawyer, then you would be advised to take that future income under consideration when purchasing auto liability insurance coverage.

If all four of the above points apply to you, then you are at risk of being sued for more than your insurance coverage, which means that you will need higher limits on all your insurance policies to fully protect you.

Taking out this level of coverage though can prove to be quite expensive, but if you are ever involved in a traffic accident then you will be glad for having such comprehensive coverage as it will have saved you a lot of personal expense.

Are You Adequately Insured?

Another important factor to take into consideration when purchasing car liability insurance is who you hit, and this of course, is something you cannot predict. But we can use some examples to give you a rough idea as to the sorts of costs you might need to protect yourself should you ever become involved in a car accident.

If you hit a teacher with your vehicle the total claim, which includes pain and suffering, lost wages and medical expenses, could reach $520,000 for a major accident. If you hit a banker with your automobile the total claim could reach $740,000, and if you hit a doctor, the total claim could reach $1,200,000.

As you can see, who you hit can vastly affect the amount of money you may eventually have to pay out, and this is something you need to take under serious consideration when purchasing car liability insurance coverage. So choose a limit which you feel offers the best level protection and is at a price that you can comfortably afford.

Be warned however, that the rate you pay for your auto insurance premiums may be determined by your credit rating. A poor credit rating may therefore result in you paying higher premiums compared to someone who has a good credit rating irrespective of your driving record.

As a side note, it is worth considering the possibility that you become involved in a road accident with an uninsured motorist. In such a case, they will have no insurance coverage to compensate you with, which means that you will have to cover any resulting expenses from your own personal finances.

There is protection you can take out against this however, and it is called uninsured motorist coverage. Generally speaking however, most people will not require this, only those who tend to have a high proportion of uninsured drivers where they live would benefit from taking out such an insurance policy.

One such example of an area with a high proportion of uninsured motorists is Texas, which statistics have shown has around 20% of its drivers driving uninsured.

How Much Does It Cost To Be Adequately Insured?

After taking the previous points into consideration, you may be wondering how much it will cost to take out high liability limits to give yourself greater financial protection.

The good news is that purchasing higher auto liability insurance limits actually costs very little extra. For example, if you wanted to raise your liability limit from $100,000 to $300,000, it would cost you around $100 additional annual premium. To raise the liability limit to $500,000, it would cost $150 additional annual premium.

As you can see, by spending a little extra to extend your auto liability insurance limits, you can vastly improve the amount of protection that you receive against lawsuits.

In the insurance business, this additional coverage is known to be excellent value and you are strongly recommended to increase your auto liability insurance limits to a reasonable amount beyond the base standard.

Split Auto Liability Insurance Limits

You can purchase car insurance with what is known as a single limit. This means that your policy will cover all injuries and property damage in an accident no matter how many people were injured or how much property was damaged. With a single limit, you have one pool of money to pay for all your liability.

An alternative option is to have a split auto liability insurance limit. With such a policy you select three limits for your auto liability coverage. These include:

• One for injuries you cause to a single person.

• One for all injuries you cause in an accident involving two or more people.

• One for all damage you cause to property in an accident.

The trouble with split auto liability insurance limits is that you are splitting your money across three different limits, when the limit you are most likely to use is the limit for injuries you cause to a single person.

What this means is that if a claim is ever made against you, you may find that your limits are not high enough to cover the claim resulting in you suffering a great financial loss. Whereas if you had a single limit, you would have been protected against the claim.

So if you do want to have a split auto insurance liability limit, then make sure that your limit for injury to one person is high enough to offer you a decent level of protection in the event of a claim.