Here in California, you’re required by law to have liability insurance that meets certain requirements — $15,000 for the injury of death of one person, $30,000 for the injury or death of more than one person, and $5,000 for any property damage that you cause.
But just because this is the minimum liability coverage you need to legally drive around doesn’t mean that you need to stop here. In fact, a lot of insurance professionals consider coverage limits of 100/300/100 to be the standard — meaning you’d have $100,000 in coverage if you caused the injury or death of one person, $300,000 for the injury or death of more than one person, and $100,000 for property damage.
Yes, getting this extra coverage means you’ll pay more in premiums, but there are 5 reasons why spending that extra money is worth it:
1. There’s a smaller chance you’ll owe anything out of your own pocket
Just because you only have $5,000 in property damage liability coverage doesn’t mean that’s all you’ll be responsible for paying if you cause a crash. These limits only pertain to what your insurance company has to pay out if you get into an accident, and anything above these limits is your personal responsibility. So, if you total a $50,000 car and you only have the basic 15/30/5 coverage, your insurance company will pay out $5,000, and the other driver can come after you for the remaining $45,000!
Don’t have that kind of money? Your future wages can be garnished to get it, or a lien can even be put on your home. Or, if you’re a business owner who had an employee cause a crash in his company car, there’s a good chance your company will be sued to make up for the small sum of money your insurance company paid out.
2. PIP isn’t mandatory in California
PIP (Personal Insurance Protection) is a type of car insurance that pays for medical expenses regardless of who’s at-fault in the accident. So, if you cause an accident that injures the other driver — and you don’t have enough liability coverage to pay for all of his medical expenses — he can tap into his own PIP benefits. In all likelihood, that would be enough to pay for everything, and he wouldn’t have to sue you personally. In fact, in states where PIP is mandatory, medical expenses have to reach a certain threshold before the at-fault driver can be sued.
But since California drivers aren’t required to have PIP insurance, there’s no guarantee that the person you injure will have PIP money to tap into. There’s also no threshold he has to meet before he can sue you.
3. California is a comparative liability state
In plain English, this means that each driver can be partially at fault for a crash. Even if you’re only 1% responsible and the other driver was 99% responsible, he can make a claim against your liability coverage. He won’t get as much as he would have if you were 99% responsible and he was 1% responsible, but he’ll still get some money.
Bottom line — if an accident is severe enough, those state-mandated coverage limits may not be high enough to foot the bills, even if you’re only a tiny bit at fault!
4. You never know when the worst is going to happen
Picking your liability limits means preparing for the worst-case scenario. Yes, your odds of getting into a horrible crash with all kinds of expensive damage may not be that high, but it CAN happen. The last thing you want is to be ruined financially if it does.
5. liability insurance is not as expensive as you think
Every policy is different, but in many cases, upgrading your coverage limits from the state-mandated 15/30/5 to 100/300/100 doesn’t cost a whole lot more. In fact, you may only spend a few extra dollars each month! When you look at it that way, you could have tons of extra protection for what it would cost to have a couple lattes at Starbucks. Seems worth it, doesn’t it?!
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