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Using Car Insurance To Avoid Car Insurance Lawsuits


Owning and driving a car entails a certain amount of responsibility, not the least of which is the requirement to carry at least the minimum amount of auto insurance in your state. What many people fail to realize, however, is that skimping on liability insurance can become a very costly mistake in the event of an accident where they are at-fault.

Auto liability insurance comprises three major components: coverage for bodily injury for one person, bodily injury per occurrence, and property damage. Generally, these are written as 25/50/10, meaning the coverage for one person injured in an accident you’re held to be responsible for is limited to $25,000, while the total amount for all parties you injure in the accident is capped at $50,000 and any property damage you’re liable for will be paid to a limit of $10,000. This is an example of a state minimum, not what every driver chooses for liability coverage.

Some policies have a combined single limit, as in $100,000 or $300,000 (the latter most often required by lending institutions and leasing companies on new cars that are financed or leased).

Minimums may not be enough

But is going with the state minimum liability coverage a good idea? One way to look at this objectively is to consider what could happen.

Anything other than a minor fender bender – and sometimes, even those, if whiplash or other injuries result – can quickly drain your bank account. Serious crash injuries involving multiple individuals, vehicles and property damage can prove catastrophic.

MORE: See Car Insurance Guide: What To Cover, What To Save

Remember that the auto liability coverage will only pay out a maximum of what you select. In the 25/50/10 scenario, the total the insurance company would pay is $60,000. Anything above and beyond that is your responsibility.

Think about the high costs of hospitalization, continuing care, rehab, medication and multiply that by potential months and possibly years and you get an idea where you can soon wind up bankrupt. Own a house? Forget about it if the other party or parties sue you in a private lawsuit and win the judgment. Everything you own, everything you’ve worked so hard to save can be wiped out.

And, you’ll still have to pay the attorney fees to argue your case or go for an appeal.

Protecting your assets

On the other hand, using car insurance to avoid car insurance lawsuits may be one of the best preventive strategies you could employ.

Raising your auto liability coverage limits is simply a matter of getting in touch with your agent or insurance carrier. Before you jump to $300,000 from a state minimum or even from $100,000, discuss what is recommended to keep you adequately covered. The premium increase shouldn’t be your major concern. Keeping your assets protected should be.

If you’re not comfortable with the increased premium, inquire about other discounts available to you that you may not be taking advantage of. If you’ve been with the company for a long time, you could be eligible for a longevity or persistent customer discount. If you bundle auto and homeowners insurance, there’s a discount for that, as well as insuring multiple vehicles in the family with one insurer. It may make sense to switch to house all your auto and homeowners insurance needs with one company.

Bottom line: It never pays to take the gamble and risk being on the hook for lengthy and ultimately costly car lawsuits, not when you can prevent your exposure by increasing auto liability coverage limits. Protect yourself from mayhem.

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