Insurance 101- Liability Limits

One of the biggest misconceptions I encounter while talking with people about insurance is that having great coverage costs way more than having the state minimum.

The State of Washington requires that all drivers are insured with a minimum of $25k/$50k/$10k liability limits. I am sure we have all heard this insurance jargon before, but let’s take a moment to understand what those numbers mean.

The first two numbers, $25k/$50k, represents your bodily injury liability coverage. This coverage pays for bodily injuries to other people if you are found liable in an accident. The first number, $25k, is the limit your policy will pay per person. The second number, $50k, is the most your policy will pay per incident.

The third number, $10k, represents your property damage coverage. This coverage pays for damage to other’s property in an accident in which you are found liable.

The limits above are the state minimum. However, if you are involved in an accident these limits may not be sufficient to cover your liability.

I am not going to throw a lot of stats and numbers at you about car accidents. I think it is sufficient to say that if anyone is involved in a car accident, and has to spend a few days in a hospital, that $25,000 will not be enough to pay for their care. If there were more than one person in the car at the time of the accident the $50k limit per incident will get exhausted quickly.

Now if there were more than one car involved in the accident how far do you think $10,000 in property damage will go?

If there are damages that exceed your limits and you are liable, either bodily injury or property, how would you cover that expense? If you aren’t able to cover the liability you are still on the hook. An attorney for the injured individual could pursue a judgment against you. If a judgment is awarded, they could pursue garnishing up to 25% of your wages. I don’t think any of us want that to happen, and it doesn’t have to.

The limits we’ve discussed above are the state minimum. However, I don’t know any insurance professional that will recommend these limits to you. No one wants to have the legal issues after an at fault accident if you aren’t properly insured. You can increase these limits to a number that fits best for you and your family.

Back to the misconception I opened with. You can get liability limits of $250k/$500k/$100k, ten times the state minimum, for significantly less than ten times the premium for minimum coverage. Everyone’s rate will be different so it isn’t appropriate to quote a specific amount for the difference, but I will tell you it isn’t ten times. I challenge you to call your agent and ask them what the difference would be for you. If you can show me that it cost 10 times more, then your next coffee will be on me.

I hope this helps you understand some of the numbers you see on your policy. Over the next couple of weeks we will look at some of the other numbers you will see on your auto policy.

The bitterness of poor coverage lingers long after the sweet price is forgotten.

Joe Urvina is an insurance agent located in Gig Harbor, WA
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