State Minimum or Jail Maximum? The Importance of Higher Auto Liability Limits

Why state minimum auto insurance liability limits aren’t enough – and what it could mean for you when carrying them.

When it comes to choosing car insurance policies, many uninformed people will just ask for the “minimum required”. After all, if the state requires a certain amount and they have to get car insurance, there isn’t much point to adding to the cost, right? Wrong. Your choices on your car insurance policy are entirely your responsibility if something should go wrong and you do not have enough coverage to pay out for injuries or damage.

Some states require higher BI (Bodily Injury) minimums like Texas and North Carolina who require no less than $30,000 each person. However, there are some states that either don’t require BI, or require a very low minimum like Florida, California, and Ohio. These three require $15,000 or less per person for BI.

Just so you completely understand the meaning and impact of this information, BI is what pays the other party if you cause accident or injury while operating or possession of your vehicle. It’s pretty much assumed that you will be responsible for all injuries while driving, but also consider the other possibilities.

Let’s say you allow a house-guest,  friend, family member, or neighbor use of your car for a day of running errands and they cause a three-car accident. While the insurance companies and injured parties will first go after the driver, if there is no or insufficient coverage, you are the next in line to be targeted. After all, the owner is entirely responsible for what happens while your car is being operated.

Will you have enough with a $15,000 policy to pay out for four, five, or even six injured people who all need emergency medical care, ongoing therapy, or hospitalization? Don’t forget to include their lost wages from work. Suddenly it is clear that $15,000 might not be a wise choice if you can include more coverage for pennies.

Florida doesn’t even require BI in some situations since they are a no-fault state. This means there are a lot of people in the state of Florida that only have purchased a minimum of first-party medical protection (PIP) and have no other coverage.

If you are one of these people and you hit someone, you cannot guarantee that the injured parties are Florida residence with adequate PIP coverage. Florida has the most visitors from other states and countries than most other states. If you hit someone from another state or country, you will have to pay entirely out of your pocket for their medical care, lost wages, etc., if you have no BI.

Don’t dismiss or diminish the importance of choosing your BI coverage. If you have a pretty decent driving record, you might be surprised to learn you can double or even triple your liability for the cost of a cup of cappuccino a month. If you find that increasing your limits are costing you a lot, you might be a younger driver, riskier driving history, or lack of continuous liability insurance. Work on whatever it is that is holding you back and every renewal check on the cost to increase.

The scenario you want to avoid: Lawsuit, wage garnishment, and/or jail time for failing to pay the costs of injury or damage for which you are liable.

Another point that might surprise insurers: When you maintain high BI limits for at least one year, your insurance favorability increases allowing you to be in a lower risk rating group for better rates! So in essence, bigger BI can give you smaller rates in the future.

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