State Minimum Auto Liability: Is It Enough?

State minimum insurance requirements are minimal. Most states demand less than $100,000 for bodily injuries and $50,000 for property damage. Some states require only $10,000 for property damage coverage.

How many cars valued at greater than $10,000 travel the highways? How many trucks carrying cargo are worth more than $10,000? $50,000? $100,000?

According to the 2010 census, the median family net worth exceeded $200,000. That amount includes houses, cars, savings, retirement funds, cash in the bank, college savings, and furniture and personal effects. Half the families are worth more, half have assets less than $200,000; all of it is hard earned.

If the family is underinsured for liability, their net worth is vulnerable to be seized in a lawsuit based on injuries or property damage caused by any family member driving a vehicle. The car owner and the car driver become parties to the suit.

Bodily injuries sustained in car wrecks devastate lives. People unable to work, the high cost of medical treatment, rehabilitation expenses, and the pain and suffering can only be compensated with money. The money comes from the insurance company or the liable party's personal wealth.

Not convinced you need higher limits? Bankruptcy options are available?

Not all liabilities are released in bankruptcy. Many states have specific legislation disallowing debt reduction for certain accidents, most notably driving while intoxicated. Wage plans reduce take home pay by as much as thirty three percent. Many employers do not tolerate either bankruptcy or wage garnishments.

Still not convinced? How about a selfish motivation?

Other drivers are either uninsured or underinsured. Most insurance companies will not provide uninsured motorist coverage in limits greater than the liability limits of the policy.

Uninsured and underinsured motorist coverage from your policy pays on behalf of the driver who hits you if they are poorly insured. In a classic exercise of the golden rule, insurance companies only sell limits commensurate with the protection you offer others.

Proper limits of liability allow you to protect yourself from the improper coverage other people maintain.

So how much coverage is enough? What are reasonable limits of liability?

Ask your insurance professional. And consider this:

Your assets are your excess insurance coverage. This means that when the limits of your policy are reached, your assets are at risk. Excess insurance - umbrella policy - is available in one million dollar layers over your automobile and homeowners' liability limits if those limits qualify - are high enough. Protect yourself against underinsured drivers by increasing your uninsured motorist coverage.