Occasionally I get asked by clients and friends “how much auto insurance should I buy?”
The natural tendency is to get close to the lowest premium that you can find and only buy that much coverage. The state minimum in Georgia is $25,000 per person in liability coverage, so I understandably often come across people with these type of policies.
However, I believe it is an extremely risky move to purchase a minimum liability policy. The most obvious reason is imagine you are injured in an auto accident that is not your fault.
You have almost no control over the auto collision process from start to finish. The crash itself was outside of your control, as you did nothing wrong. The severity of the injury and recover is largely something you don’t have a say in, nor are the medical bills you get stuck with, along with any lost wages through missed work. You are also stuck with your pain and suffering, and who knows how hard that will be to deal with.
You also don’t know if the person who injured you has purchased enough insurance to compensate you fully for all of the aforementioned damages.
Fortunately however, there is one part of the process you do control- how much uninsured/underinsured motorist coverage you purchase. Uninsured/underinsured motorist coverage is insurance you buy to protect you in the event the tortfeasor (i.e., at fault party) does not have enough insurance to fully compensate you for your losses.
This is the number one reason I recommend purchasing a significant amount of underinsurance motorist coverage with your auto policy. Even as a pedestrian, you encounter automobiles every day- many of which are driven by people with the state minimum in liability coverage. So every single day you might need to use your underinsured motorist coverage.
This exact scenario played itself out earlier this year with a client of mine. He was badly injured in a crash and was not in any way at fault. The person who caused the injury only had $25,000 per person in bodily injury liability coverage. My client only had an additional $25,000 per person in uninsured motorist coverage.
So while my firm did get him the $25,000 policy limits available under each policy, his total recovery of $50,000 was well under what he could have recovered if more insurance was purchased by either him or the liable side. Since neither did, the recovery was capped at $50,000. The damages were easily worth over $100,000, but the recovery was not close to it.
Yes, no one likes paying a higher premium every month, particularly for a part of your policy that you will only use as a backup plan to the at fault party’s coverage. However, I have too often seen the scenario play out that my client either had no uninsured motorist coverage or too little.
My client therefore was not fully compensated for her injuries. The client would have received a much more substantial settlement payout if she had just purchased more uninsured motorist coverage for this exact scenario.
So next time you go to purchase auto insurance, remember you are on “offense” too and not just defense.
By Peter Bricks