How Much Insurance Coverage Should I Have? (Part 2) | Liability Coverage

Understanding Liability Coverage

Our last blog entry discussed the details of how much Personal Injury Protection (PIP) a person should carry on their insurance policy. Now we will discuss the reasons to consider carrying more Liability coverage instead of the minimum requirement, which can help pay for related legal or medical payments.

An Example of How Liability Insurance Works

This greatly depends on the person and their level of assets. If you have few or no assets, then you can carry minimal liability coverage. For instance if we represent “Saintly Sally” against “Joe Shmo,” and Sally has been injured by Joe’s negligent driving, the first thing we want to know is how much liability coverage Joe has on his policy. If Joe only has $50,000 of coverage, and Sally has medical expenses and lost wages of $150,000, then we have a problem. How can we make up the $100,000 difference? One way is to collect from Joe personally. If Joe has no assets of any value, then we have nothing to collect from him and he should have no concern. However, if Joe has a house, car, or bank account then we might try to collect against him personally. This could mean garnishing a bank account; forcing a sale of his house; and forcing a sale of his car, boat, or any other toys of value.

This may seem harsh, but it is the reality when such a situation arises. If you want to prevent this problem, make sure to carry higher liability limits. If Joe’s policy, in the aforementioned scenario, had $250,000 of coverage then Sally’s attorney is never going to think about Joe’s assets. There is no reason to if there is enough insurance to cover Sally’s damages.

Disclaimer:  Our Hagerstown and Frederick personal injury attorneys focus on the injury to your person. This means we will negotiate the value of your vehicle with the insurance company, but it is a very small part of what we do, and therefore these posts will not discuss comp/collision coverage for your vehicle.

[Next: Part 3 of 3: UM/UIM (Uninsured/Underinsured Motorist Coverage)]