If you watch TV or listen to the radio, chances are you’ve seen or heard a commercial from a personal injury attorney. You know the ones- “I called (name of law firm) and they got me $700,000!” The frequency of these commercials means you’re more likely to get sued if you are at-fault in an accident.
The fact of the matter is, there are people out there that see a big payday if they get in an accident. Insurance is there to pay your medical bills paid and get your vehicle fixed. When the injured party wants to pocket extra cash, it drives up rates for us all.
Read more about Colorado’s increasing rates in our blog 5 Reasons Insurance Rates Keep Increasing in Colorado.
If you’re at-fault in an accident your insurance company will only pay up to your liability limits. Anything beyond that is your responsibility. If you don’t have that money laying around, they can take your home or garnish your wages.
Here are 3 ways you can help protect your family and your financial future:
1. Increase the liability limits on your car insurance
The easiest way to protect your assets is to have high liability limits. Liability coverage pays for the injuries of others if you cause an accident. It can also cover damage to property, like if you hit a car or house.
A policy with the minimum limits allowed in Colorado will pay up to $25,000 per person injured in an accident. If more than one person is injured, that policy won’t pay more than $50,000 for all injuries. The most a state minimum policy will pay for property damage is $15,000.
Most people that have state minimum limits don’t know the risk they are taking.
You rear-end someone and push them into another car. There are two damaged cars and both drivers are injured. The first person’s medical bills are $30,000 and it costs $12,000 to fix their car. The second person’s medical bills are $20,000 and it costs $9,000 to fix their car. What would a state minimum policy pay?
For the first person: $25,000 for medical bills (that’s the per person limit), and $12,000 to fix their car. You have the pay the extra $5,000 out of pocket for their injuries.
For the second person: $20,000 for medical bills and $3,000 for their car. The property damage limit is $15,000 and $12,000 was already paid, so you have to pay the extra $6,000 to fix their car.
In total, you’re paying $11,000 out of pocket.
At Integrity First Insurance, we focus on educating our clients. Low liability limits may save you a few dollars a month, but could cost you more in the long run.
We recommend limits no lower than $100,000 per person, $300,000 per accident, and $100,000 for property damage. As your assets increase, so should your liability limits. The more you have to lose, the more protection you need.
It’s important to be a safe driver, but also to plan for the unexpected. Accidents can happen to even the most cautious drivers.
Here’s one example of a claim that I’ve seen firsthand while working in the insurance industry:
A client was driving on I-70 when their tire blew out, causing the vehicle to swerve. They sideswiped the vehicle in the lane next to them which caused a chain reaction. In a matter of seconds there were 5 vehicles involved in the accident.
Even though our client didn’t do anything wrong, he was still considered at-fault. Since his car made first contact, he was legally responsible for all the injuries and damage.
If he had state minimum limits, his policy wouldn’t have covered all the costs from that accident. Since he had enough liability coverage, he didn’t have to stress about how he would pay for those damages.
2. Make sure you have enough liability insurance on your property policies
Have you ever thought about what would happen if someone fell down your stairs and broke their leg? What about if your dog bit your friend while they were house sitting for you? How would you pay for those injuries?
Whether you rent or own, you should have a policy that provides liability coverage.
The most common situation where personal liability coverage pays out is when someone gets hurt on your property. Although it can also extend for things like if your dog bites someone or if you damage someone’s property.
One of the benefits of personal liability coverage is that it extends to all members of your household. It also extends coverage anywhere in the world, not only on your property.
Keep in mind that when your kids go away to college, they can still be considered a member of your household. That means your personal liability coverage can still extend to them.
A coworker of mine had a pretty scary incident when he was in college. He was on the soccer team and they had a gathering with some other members of the team. They didn’t provide alcohol and they weren’t drinking since they had practice the next day.
A teammate’s friend showed up and had clearly been drinking before he got there. He only stayed for about an hour and didn’t drink on their property. After that he went back to his dorm room and went to bed on the top bunk.
The next day his roommate found him face down on the floor, he had fallen off the top bunk and hit his head. They later found out that he had serious brain injuries and wouldn’t wake up. His family tried to sue the kids that hosted the gathering.
Luckily, they were able to get the case thrown out since they didn’t provide the alcohol and he wasn’t drinking on their property. If the case had gone to trial, my coworker’s parent’s home policy would have stepped in. The insurance company would’ve provided a legal team to fight the charges. And if found liable, their liability coverage would have paid the judgement, up to the policy limits.
Personal liability coverage will help protect you and your family financially. By covering the legal costs and judgements against you, your liability coverage can give you peace of mind.
The minimum amount of personal liability insurance offered by most carriers is $100,000. At Integrity First, we always try to write policies with at least $500,000 of personal liability coverage. The price difference is minimal, generally only a few dollars a month. And if you get sued, it’s a lot more comforting to know that you have $500,000 to protect you and to fight a legal battle.
Situations where your personal liability coverage could extend:
- You have people over and someone trips over an uneven step and injures themselves.
- You throw a party and a guest drives home after drinking. They get into an accident, injuring others or damaging property.
- You’re at the dog park and your fur baby bites another dog or a person, resulting in medical or vet bills.
- Your kids are playing baseball at a park and a baseball they hit breaks the window of a home next to the park.
- You’re smoking outside and don’t fully put out your cigarette. It sparks a fire that damages the condos or apartments around yours.
- You are skiing or snowboarding and a kid turns in front of you unexpectedly. You collide with them and cause injuries.
3. Last but not least, get an Umbrella Policy
Your insurance company will only pay out up to the liability limit on your policy. If you have an umbrella policy, you can have an additional $1 Million – $5 Million in liability coverage.
Umbrella policies are beneficial to anyone at risk of getting sued, especially anyone with assets to protect.
An umbrella policy blankets your underlying policies, including vehicle or property policies. If your underlying policy limits are exhausted, the umbrella policy will kick in to pay for any outstanding legal costs or judgements.
It only takes one serious accident to put everything you own and your future earnings at risk. The more vehicles and properties you own, the more liability exposure you have. To determine what limit you need for an umbrella policy, you should consider your household risks, assets and future earnings.
The cost for an umbrella policy will vary based on the amount of risk in your household. Some factors will include the number of vehicles, the age and driving history of the drivers in the household, and the number of properties you own.
For an average risk, an umbrella policy can cost as little as $300/year for $1 million of liability coverage.
Examples of claims actually filed against an umbrella policy:
- A 28-year old engineer dove into a friend’s above ground swimming pool and struck his head on the bottom. As a result, he became a quadriplegic. He sued both the homeowner and the pool manufacturer. The court found the homeowner to be 60 percent responsible and the pool manufacturer to be 40 percent responsible, and awarded $10,000,000.
- The insured’s tenant claims she became ill from carbon monoxide poisoning resulting from a faulty furnace. The tenant claimed permanent brain damage and demanded $750,000.
- A babysitter left a 5 month old infant unattended in a walker. The infant toppled the walker, struck her head on the floor and suffered brain damage. The parents of the infant sued the teenage babysitter and her parents. The court awarded the infant’s parents $11,000,000.
In today’s society, you can be sued for nearly anything. All the personal injury attorney commercials on the TV and radio have made Colorado an especially litigious state.
You may think that nothing that bad is going to happen to you, and hopefully you’re right. But I’d guess that most people that have been involved liability lawsuits thought the same thing before it happened to them.
Rather than hoping for the best or living in fear of a lawsuit, the best thing you can do is be prepared. Ensure you have enough liability coverage to protect your family. As long as you have the protection you need, you can live your life to the fullest. If something does happen, your policy will be there to fight on your behalf.
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