How Much Car Insurance Coverage is Enough?

In December of 2016, we wrote about the various types of car insurance.  Today, we are focusing on why it’s important to make sure you have enough insurance.

The amount of your policy limits under your liability insurance is the maximum amount of money your insurance company will pay on your behalf if someone files a claim against you for personal injury.  This can be a claim that never goes to suit or it can be a lawsuit that has been filed.

Maryland requires you to carry liability insurance of at least $30,000.00 per person and $60,000.00 per incident ($30,000/$60,000).  Your options for liability insurance can range from the minimum, up to $250,000/500,000.  These limits can vary depending on the insurance carrier.  The per person limits are the most that any single person can recover from the accident and the per incident amount is the most your policy will pay out in total.  So, if an accident injures 4 people and you have policy limits of $250,000/$500,000, the total amount of money that can be paid out is $500,000.00, but no matter how serious any single person’s injuries are, they cannot recover more than $250,000.00 from your policy.

So, how much is enough?  Even relatively minor accidents where the injured party only receives conservative treatment can involve thousands of dollars in medical bills. The law allows an injured party to recover all of their economic damages, (usually medical bills and lost wages).  Additionally, they can recover non-economic damages too (pain and suffering).  A policy with limits of $30,000/$60,000 can be exhausted very quickly.

What happens if you find out after a claim has been filed against you, that you don’t have enough insurance?  You will not be able to purchase a policy that will retroactively apply.  Assume you have a policy with limits of $30,000/$60,000, the case goes to trial and a verdict is returned in favor of the injured party for $50,000.00.  How is the extra $20,000.00 paid?  There are a couple of possibilities.  If the injured party has enough underinsured motorist coverage, their policy will pay it.  However, their insurance company has the right to sue you to recover any money they pay to their insured.  Another possibility is that the injured party can enforce the excess verdict against you personally.  They can garnish your wages, attach a lien on your property and utilize any number of procedural tools to enforce the judgment.  This may also force you into filing for bankruptcy.

Your policy limits can also impact the amount of coverage available to you and your family if you are injured by someone who is uninsured or underinsured.  We’ll discuss this in more detail in our next blog post.

In addition to increasing your policy limits, it may also be worthwhile to purchase an umbrella policy as well.  This is a policy that kicks in additional coverage when your primary coverage is exhausted.  Call your insurance company or agent to discuss what policy limits are appropriate for you.