Why you should raise your liability insurance limits
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Why you should raise your liability insurance limits

Insurance cardBuy as much car insurance as you can afford.

Not only do you probably need more liability coverage -- almost all people do -- but the extra liability coverage is usually downright cheap.

Consider a driver in California, where the law requires a very low minimum of $15,000 per person in bodily liability coverage, up to $30,000 per accident, and $5,000 in property damage liability car insurance. In a worst-case scenario, the insurance company would have to pay out $35,000.

An adult male driver in ZIP code 94608 -- in the Bay Area -- could buy liability insurance at the state minimum requirements for as little as $470 a year. But he could buy 10 times as much liability coverage for just a few dollars more.

We did a car insurance comparison for liability-only rates. You can see below that bumping up coverage comes at a very low cost:

Company ACompany BLimitsAdditional cost (avg.)

Most experts will advise anyone with assets such as a home or savings to buy at least 100/300/50. After all, the typical new car costs $30,000 these days. Hit somebody in a new Lexus and you’re on the hook for whatever your insurance company doesn’t pay.

Those rates are for a 50-year-old man with no ticket or accidents. While rates go up across the board with a worse driving record, the extra coverage still remains a fraction of the overall cost. Here’s what the rates look like from two insurers if two speeding tickets for 10 mph over the limit are added.

Company ACompany BLimitsAdditional cost (avg.)

The pattern holds true for a younger driver as well. Rates below are for same coverage on a 24-year-old man with no accidents or violations:

Company ACompany BLimitsAdditional cost (avg.)

An at-fault accident with $10,000 total damage raises the younger driver’s rates substantially, but the additional coverage is still a bargain if he has substantial savings or a home.

Company ACompany BLimitsAdditional cost (avg.)

Rates were calculated on ZIP code 94608 for a 50-year-old single male with a college degree, a homeowner, driving a paid-for 2002 Buick Regal LS 12,000 miles a year. His current insurer is State Farm; his current coverage level is 100/300/50. These annual rates are for liability coverage only.

Combined single limit liability insurance: What it is and if it's worth it

When you are researching your options for liability insurance and what limits to buy, you may also want to consider a combined single limit policy (CSL), which typically give you more coverage and protection than split limit policies.

With CSL, the car insurance company would combine both bodily injury liability and property damage liability insurance under a single limit. The insurance company would pay up to the stated limit on a third-party claim regardless of whether the claim was for bodily injury or property damage or both.

The split limit has the portions of payment limits already designated while the combined single limit policy can give a policyholder flexibility to use the entire coverage for bodily injury and property damage as it is needed to be allocated between the different expenses.

If you purchase a CSL policy and are at fault in an accident, you may be better covered for accidents than you would be with a split policy. Let's look at an example where you are at fault in an accident and then look at it from both a split limit policy of 100/300/50 and a $300,000 CSL policy.

With the minimum insurance split limits of 100/300/50 if you caused over $50,000 worth of property damage to a vehicle you would usually be personally responsible for damages that exceed that amount. If you hit multiple cars that limit could easily be reached. So, say you caused $65,000 worth of property damage, you are now $15,000 over your property damage limit.

If one person was severely hurt by you in the accident and exceeding your $100,000 limit for one person injured in one incident, say by $50,000, then you would now be over your limit in two different areas of your split limit policy by a total of $65,000. You would be responsible for paying this amount.

With a $300,000 CSL insurance policy, everything would be covered in the example given above because you can split the coverage up how you need it. So your property damage liability can pay out $65,000 and your bodily injury liability can pay out the $150,000 under CSL for a total of $215,000. You are still well below your $300,000 combined limit so are better protected.

In states that allow a combined single limit instead of split limits the minimum CSL is normally the property damage liability limit plus the bodily injury liability limit (for two or more people injured in an accident).

The availability of these different forms of coverage varies from insurance company to insurance company so you should shop around.


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2 Responses to "Why you should raise your liability insurance limits"
  1. michael

    The article is well written but is missing the last item: Umbrella liability insurance. You can purchase an additional $1,000,000 for a about $200 a year. Again: Cheap, cheap, cheap

  2. Jim

    I raised my coverage with Safeco from 100/300/50 to 250/500/100 and it cost me only $32 more a year.

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