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Why you should raise your liability insurance limits


Car and dollar signBuy 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. Doubling your liability protection does not mean you pay twice as much for the extra coverage.

Here's an example of why you need more than minimum liability coverage. If you cause an accident that wrecks another car and seriously injures multiple people in the vehicle, you would be responsible for paying all the medical and repair bills. If you have just bare-bones coverage, the total amount of the accident would likely be much lower than what your insurance would cover. That means you could be sued and have to pay a large settlement and legal bills to cover the outstanding cost.

You must have liability insurance to drive legally in all states except New Hampshire, and even there, most insurers won't sell you a policy without it.

Liability insurance pays medical bills for those injured in an accident you cause, and for damage you cause to other cars -- it doesn't pay for repairs to your own vehicle. For that, you would also need optional comprehensive and collision insurance.

Here is an example and explanation of how car insurance companies refer to liability: 50/100/50

The first two numbers refer to bodily injury liability, which pays the hospital bills of anyone you injure.

  • The first number is the per-person limit.
  • The second is the per-accident limit.
  • The third number is the property damage liability limit, which would repair or replace the car of anyone you hit.

When deciding how much liability insurance to get, you typically choose from:

  • your state required minimum to drive legally
  • 50/100/50
  • 100/300/100

You may also opt for "full coverage," which means you have liability plus comprehensive and collision added to your policy.

When deciding how much car insurance you need, don't skimp on liability. Buying as much liability insurance as you can afford is important because low liability limits put your savings and assets at risk should you cause an accident. The average new car costs more than $35,000 and cars being built today cost much more to fix than vehicles from a decade or two ago. Medical costs also continue to rise each year. High liability limits protect you if you're at fault and won't leave you needing to sell your house to pay for the cost of an accident, say totaling another driver's car, or for legal fees should you face a lawsuit.

With extra liability protection coming at super affordable prices, it is simply a wise investment.

Consider the following, based on CarInsurance.com’s analysis of rates:

  • The nationwide average cost for state minimum liability coverage is $526
  • Increasing that coverage to $50,000/$100,000/$50,000 averages only $561. So, you only pay another $35 a year by increasing your coverage.
  • If you boost your liability protection by jumping up to 100/300/100 (without comprehensive and collision) from 50/100/50, it costs just $74 annually, on average.
  • If you increase state minimum coverage to full coverage, $100,000/$300,000/$100,000 with comprehensive and collision and a $500 deductible, the average goes up to $1,350, which is $824 more per year or $69 per month.

CarInsurance.com consumer analyst Penny Gusner advises anyone with assets such as a home or savings to buy at least 100/300/100, but even higher limits of 50/100/50 are much better than your state minimum required to drive legally. After all, you’re on the hook for whatever your insurance company doesn’t pay.

Enter your state in the search field to see how much you pay to boost liability from state minimum requirements to 50/100/50.

StateState minimum average rate50/100/50 average rate$ Difference from state min to 50/100/50% difference
Alaska$318$323$52%
Alabama$419$432$143%
Arkansas$397$416$195%
Arizona$496$573$7716%
California$491$592$10121%
Colorado$506$544$387%
Connecticut$761$868$10714%
DC$745$809$659%
Delaware$805$904$9912%
Florida$884$930$465%
Georgia$532$577$459%
Hawaii$555$609$5410%
Iowa$294$323$2910%
Idaho$319$343$247%
Illinois$383$403$215%
Indiana$400$424$236%
Kansas$397$427$308%
Kentucky$745$793$486%
Louisiana$705$831$12618%
Massachusetts$539$609$7013%
Maryland$710$748$385%
Maine$359$364$51%
Michigan$2,012$1,649-$363-18%
Minnesota$579$575-$4-1%
Missouri$409$457$4812%
Mississippi$398$425$277%
Montana$323$356$3310%
North Carolina$347$383$3610%
North Dakota$363$372$92%
Nebraska$329$344$165%
New Hampshire$485$508$245%
New Jersey$677$779$10215%
New Mexico$424$445$215%
Nevada$623$768$14523%
New York$812$879$668%
Ohio$383$381-$2-1%
Oklahoma$444$461$174%
Oregon$690$702$122%
Pennsylvania$480$526$4610%
Rhode Island$751$876$12517%
South Carolina$484$525$418%
South Dakota$267$290$239%
Tennessee$404$430$267%
Texas$465$488$245%
Utah$531$545$133%
Virginia$372$409$3710%
Vermont$337$350$134%
Washington$466$503$388%
Wisconsin$373$415$4211%
West Virginia$493$545$5311%
Wyoming$339$360$216%

*Methodology:

CarInsurance.com commissioned Quadrant Information Systems to field rates from up to six major insurers in nearly every ZIP code of the country for three coverage levels. We’ve averaged rates here for state minimum liability limits and for $50,000 per person injured in an accident; up to $100,000 per accident, with $50,000 in property damag, by state for the driver profile of a 40-year-old male, 2016 Honda Accord, with good credit and no accidents.

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

      Reply»  
  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.

      Reply»  
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