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If damage exceeds my limits, can they make me pay?


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Question: I crashed my pickup into a utility pole and a business sign. My property damage coverage limit is $5,000, and my insurer has informed me after paying for the pole repair there is no money left to pay for the sign. I’ve arranged to pay the business owner’s deductible, but his insurance company is asking me for the whole amount of sign repair cost and deductible. Can they do this?

Answer:  Yes, they can. Your accident is a prime example of why it’s important to carry more than just the state minimum liability limits, especially if limits are quite low, such as only $5,000 for property damage liability.

You never know what you’ll hit in an accident.  It’s not like you can only aim for cars with low values if you start to crash.  If you hit a newer car, a building, a piece of public property or multiple items (as in your situation) you could easily exceed your $5,000 limit by tens of thousands of dollars, and you will be responsible for payment on anything that isn’t covered by your insurance policy limits.  (See “You hit it, you bought it.”)

The maximum limit of your property damage liability coverage has already been reached with the utility pole repair; thus this leaves you personally responsible for the cost of the repairs to the sign you damaged.  Your insurance company won’t pay out more than the limits you bought.

If you pay the business owner directly, have him sign documentation on how much you gave him and why. This way, if the business owner is trying to get paid twice, you can prove to his insurer what you’ve already paid out.  You shouldn’t be required to pay twice for the same thing.

You can now see why the insurance industry experts recommend motorists buy at least $50,000 in property damage liability and for bodily injury liability $100,000 per person and $300,000 per accident. Otherwise you risk your own savings and other assets.

The cost of raising your liability limits varies, of course, but it’s worth pricing to see if you can afford higher limits and give yourself this added protection.  

For example, I quickly ran a quote for a 35-year-old male in Houston driving a 2008 Honda Accord with just state minimum liability coverage of 30/60/25 and collision and comprehensive with $500 deductibles. The annual rate came up as $946. 

I then raised the liability limits to 100/300/50 and the annual rate went up by $208. Doubling the property damage liability limit to $50,000 cost just $42 -- and it would have saved you a lot of trouble.

Shopping for higher liability limits can easily be done by speaking to your agent for a quote and then comparing multiple auto carriers online to make sure you find the best car insurance rates for the coverages you want.

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