Back in January I wrote about the new financial limits that were ushered in with the new year. While it’s important to understand the limits that impact our savings and taxation, there is another set of limits that everyone should know: your automobile insurance limits.
Auto liability limits protect us from financial harm when we are involved in an accident, at least if we are properly insured. Most states only require minimal liability limits. The minimum limits are usually too low and offer inadequate financial protection if you are involved in a major accident….or sometimes only a minor accident.
Unfortunately, today’s litigious world finds lawsuits occurring at a breakneck pace. Many suits are filed over auto accidents. When an underinsured driver finds himself involved in a wreck that produces damages beyond his limits the litigation begins. Once the insurance limits are exhausted and paid out the insurance company is not required to pay out any more damages.
The State of TN requires 25k/50k/15k as a minimum. The first number (25K) represents the amount of damages paid per person due to a claim. The second number (50K) is per accident. For example, if three people in another car are involved in an accident in which you are at fault and each person requires 25k worth of medical care, you could get sued for the remaining 25k of medical care. If one person in the other car requires 50k in medical care, you could be sued. The last number (15k) represents property damage. This one is easy to see why low limits can put you at financial risk. If you’re involved in an accident that totals another driver’s car and they happen to drive a car valued at more than 15k, you could be sued.
The old insurance adage of don’t risk a lot for a little is certainly in play when it comes to auto insurance. If you are not sure about your auto limits, ask your agent…..or better yet, ask a fee-only financial advisor. Take the initiative to know your current limits. Determine the proper limits for your situation. Review the possibility of an umbrella policy. You and your family could be at financial risk!
