The last few weeks we have discussed both and coverage. Now that we understand what these coverages are and how they protect our family, let’s take a moment to understand what limits we should consider.
We discussed that the state minimum liability limits are $25,000 / $50,000 / $10,000. The first number being the limit that your insurer will pay out for bodily injury per individual, the second is the limit for total bodily injury per incident and the third being the limit for property damage. While this is the state minimum I don’t think it is adequate coverage for everyone, and I hope to explain why.
First, to understand what limits we should consider we need to remember why we purchase insurance. Insurance is designed to protect our assets. So to understand what limits are best for our family we need to take the time to add up what we are trying to protect.
If you were to be found liable in an accident and the victim’s attorney was able to secure a judgment against you what assets are at risk?
There are four areas I want you to think about:
- Real Estate: Equity that you have in your home or investment properties.
- Personal Property: Autos, boats, recreational vehicles etc.
- Income: Remember that with a judgment in hand the attorney for the victim could pursue a garnishment of your wages. The garnishment can be up to twenty-five percent of your income for up to ten years.
- Investments/Savings: This would include bank accounts and any investment accounts that you have.
After adding up your family’s assets in these four categories you can see how the state’s minimum limits are just not appropriate for most families.
Take the time to understand your limits and why you chose them. If you haven’t reviewed them lately, call your agent and go over your limits. Make sure you are comfortable with the insurance plan you have created for your family. Then if the time ever comes that you need your insurance, you can be assured that you will be covered.
The bitterness of poor coverage lingers long after the sweet price is forgotten.