The Problem with Minimum Auto Liability Limits

When buying auto insurance, you may have noticed that your agent wouldn't allow you to buy liability limits lower than a certain level. This is because every state has a minimum amount of liability every driver must be insured for to be able to legally drive. While having a requirement for the minimum amount of liability coverage is a good thing, can any problems arise out of only having the minimum amount of coverage? What happens if someone doesn't have enough coverage? How can someone get enough coverage?

Every state has its own laws regarding automobiles and automobile insurance. In Nebraska, the minimum amount of auto liability insurance you're required to have is in the form of split limits, with the limits being as follows: $25,000 for bodily injury per person; $50,000 for total bodily injury; $25,000 for total property damage. Split limit coverage is often denoted as "25000/50000/25000" or just as "25/50/25".

Though these limits are all one needs to be considered an 'insured driver', there is a great amount of risk involved with only having the minimum amount of liability insurance. Here are a few accident examples:

You hit a Lexus: Luxury cars take luxury parts, along with costly import or dealer servicing. Even a relatively minor accident might exceed the $25,000 of coverage.

You hit a car with three occupants: Say each person receives $20,000 worth of medical care. In this situation, your coverage would only pay for $50,000 of damages, leaving you responsible for the extra $10,000. (Imagine a more severe accident and/or an accident with more people involved!)

You cause a serious wreck with a sports car: Though the new Corvette you hit only had one occupant, you've totaled the car and have caused severe injuries to the driver. Replacing the Corvette leaves you with about $25,000 of out-of-pocket expenses that weren't covered by your Property Damage limit. The spinal surgery, rehabilitation, additional care, and lost wages adds up to $150,000, leaving you with $125,000 to cover yourself after your insurance is maxed-out at $25,000 of bodily injury damages.

These accident examples are all fairly minor, considering all of the possible scenarios there are. Serious accidents can and do occur, and even with these minor accident examples, the state minimum limits are not enough to cover you liability!

What Happens if I Do Not Have Enough Liability Coverage?

When you cause an accident that you do not have enough liability insurance to cover, you're considered an 'underinsured driver'. While underinsured drivers won't receive fines and legal repercussions like uninsured drivers would, you can expect to have to battle things out in court, and to have to pay the uncovered damages yourself. If you can't afford to pay everything, property may be seized and/or your wages may be garnished.

How Do I Avoid Being an Underinsured Driver?

One could argue that you never truly have enough liability insurance to cover everything that could happen. However, getting liability limits high enough to cover almost anything is fairly easy to do, and the easiest way is to increase your Auto policy's limits. Typically, the highest limits offered on an Auto policy are 500/500/500. From there, you can buy a personal Umbrella policy, which will also cover your Renter's or Homeowner's liability as well! (Umbrella policies can be purchased for amounts higher than one-million too) So with over one-million dollars of liability protection, you should be covered for almost any situation! 

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Colten Zamrzla, CPCU

Colten first started in the insurance industry in 2010. He then pursued a Bachelor's degree in Finance & Insurance from the University of Nebraska at Lincoln. Once graduated, he immediately started studying for the CPCU and achieved it in just shy of a year. He is solely focused on commercial insurance, able to assist all types of businesses and nonprofits in risk management.

Colten has dedication and passion for his clients and the insurance industry as a whole. He dedicates time to furthering his knowledge on all things business and insurance, and he volunteers for the Independent Insurance Agents of Nebraska, a state-based trade association.