Take It to the Limit

January 20, 2014


You’ve always dreamed of owning your own home and financial independence. Now you feel like it’s never going to happen. It is a feeling of hopelessness and despair. It all happened in an instant due to a freak auto accident.

All this can happen simply by not having adequate auto insurance liability limits. A large auto accident can easily exceed your auto insurance policy limits and create a financial burden. It is easy to fall into this trap. We’re bombarded with all kinds of ads talking about minimum coverage.

Let me explain auto insurance liability limits so you can see how easily you can exceed those limits in an auto accident. On you auto insurance policy, you will see a section that says bodily injury and another that says property damage.

Bodily injury coverage is probably the most likely to exceed your policy limits in a claim. You will normally see these liability limits listed as a number, a slash, then another number (100/300). The first number is the amount of bodily injury coverage per person, and the second number is the total amount the insurance company will pay out for any one accident. The numbers are in thousands

Here is an example of how these limits work. Let’s say you are involved in an auto accident that is your fault, and there are two people injured in the other vehicle. Both of the injured people are taken to the emergency room. One of the injured people has $25,000 in medical bills while the other injured person has $50,000 in medical bills.

The minimum required auto insurance limits for the state of Illinois is 20/40. This means the minimum policy covers $20,000 bodily injury for any one person and $40,000 total for any one accident. In the above example, if you had minimum auto insurance coverage, you would be personally responsible for $25,000 in medical bills!

Many people believe “standard” auto insurance bodily injury liability limits are 100/300. This means your policy covers up to $100,000 bodily injury to one person and $300,000 total per accident. I feel we need to explore if these “standard” auto insurance bodily injury limits are too low. With the rising cost of health care, how easily could any one injury exceed $100,000 in medical bills let alone other possible costs such as lost wages?

The second portion of auto insurance liability is property damage liability. This covers damage to property of others caused by your vehicle. This could be damage to another car or other property (signs, buildings, etc.). The state of Illinois minimum coverage limit for property damage liability is $15,000 while the “standard” coverage limit is $100,000.

Here is one real life story of how close someone came to exceeding their “standard” property damage liability limit. This person was driving through an auto dealership looking at new cars on the lot. The driver hit a patch of ice and lost control, sliding and hitting eight new cars. The auto body repair bill for the new cars was $96,000; just $4,000 below the coverage limit. Can you imagine facing this situation with state minimum property damage liability coverage?

The good news is increasing your auto insurance liability limits might be less expensive than you think. There are different factors that affect this pricing (youthful drivers, type of vehicle(s), etc) so you should contact your agent to get a quote for increasing this coverage. Please also consider a personal umbrella liability policy for increasing liability coverage as well.

At Bob Oetting & Associates, we are always here to review auto insurance coverage limits for our clients. If you are not a client, we would appreciate the opportunity to review your policy and provide you with a free quote. Please contact us at 345-7063 or [email protected]

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