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Liability limits exceeded


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Question: My son was in a five-car accident, and he has $5,000 property damage liability coverage.  The damage was $7,000, so they are saying he has to come up with the other $2,000 that is over his policy limits. He’s a full-time student and has no job; does he really have to pay the $2,000?  Can his license be affected if he doesn’t pay?

Answer:  Yes, your son is expected to pay for damages that exceed his liability limits.  And, yes, in most states his license can be affected if he fails to pay the amount owed the other damaged party or parties.

When you damage other parties in an accident, your bodily injury liability pays out for the injuries for which you’re found legally liable and your property damage liability pays for damages to property, such as other cars or guardrails -- but only up to the limits you have chosen. 

After you liability limits are exceeded, you are held personally responsible to compensate those you harmed.  This is the main problem with choosing low state minimum liability limits, especially if your state requires only $5,000. 

Car repairs, let alone the total loss of another vehicle, quickly can add up to over $5,000.  Being involved in a multiple-car crash and only being held responsible for $7,000 is damages is a bit of good fortune for your son since accidents of this type typically result in damages costing tens of thousands of dollars.  

Even for a poor college student, I’d recommend at least $25,000 in property damage liability. That's enough to replace most cars -- if you hit just one. And the cost of the higher liability coverage per year would be way less than the $2,000 he is responsible for now.

To offset higher liability limits, your son can look at his policy for other ways to save money.  For instance, if he has health insurance, then he may not need uninsured motorist bodily injury coverage. 

Your son can compare car insurance rates right now to see how much more it will cost him to change coverages and have better liability protection in the future. He is relatively lucky in this case. He shouldn't press his luck.

If you son doesn’t voluntarily pay the $2,000, then the person or persons trying to recover this money can take your son to court to obtain a judgment against him. 

If he fails to pay the judgment amount, then in California the other party could ask the Department of Motor Vehicles (DMV) to suspend his license.  For judgments more than $500 in an auto accident case, the California DMV can suspend a person’s driver’s license indefinitely until the individual pays.

If your son's car were damaged in the incident, he needs to have collision coverage to make a claim, or else will also have to personally pay for the damages his vehicle sustained.

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