Insurance providers typically offer an array of policies aiming to offer financial safeguard if you’re implicated in an accident. However, the most crucial one is liability coverage. This specific type of insurance compensates for expenses associated with injuries or fatalities of individuals in the other vehicle, and any property or vehicle damage if you are identified as the culprit in the accident. This coverage also extends to passengers in your own vehicle.
Most states mandate having liability coverage. In Virginia, as an instance, the law necessitates minimum coverage of $30,000 per person and $60,000 per incident – in cases where bodily injury or death of two or more people are involved, and $20,000 for property damage. This is often expressed in insurance policies as $30,000/$60,000/$20,000 or simply 30/60/20. According to insurance specialists, most state minimum coverage prerequisites are significantly deficient. A situation elucidating this fact was mentioned by Douglas Heller, a renowned insurance expert. He gives an example of a driver who is insured by just Virginia’s minimum requirement, and accidentally causes a crash where three people garner medical bills of $50,000 each. In this scenario, the insurance of this driver would cover just $20,000 per injured individual’s medical bills, leaving the driver accountable for the remaining bills – in this context, a significant $90,000.
What’s the right amount of coverage? The Insurance Information Institute’s Loretta Worters suggests a minimum liability coverage of $100,000/$300,000/$100,000. For additional security, experts advise getting an umbrella insurance policy along with higher limit liability coverage. When paired with a homeowner’s policy, an umbrella policy extends liability protection to $1 million or more. This policy also fills any coverage gaps left by auto and homeowner policies, depending on the specific insurer.
Typically, an umbrella policy can only be purchased from an insurance company you’ve already done business with. The cost of the policy can fluctuate based on existing coverage like car, home, boat, and business insurance. Additionally, it’s important to understand the required level of your primary liability insurance, and whether your insurance provider necessitates the consolidation of all your insurance policies to obtain the umbrella policy. According to Worters, adding a $1 million umbrella policy could increase your yearly premiums by about $250 to $300.
The insurance also includes provision for damage caused by motorists who are uninsured or underinsured, in addition to personal injury protection or medical payment coverage. This covers any personal injuries you might sustain if the other driver has insufficient or no insurance. Worters advises that these forms of coverage are always beneficial to have.
