How Much Liability Coverage Do I Really Need?
According to this report, the average American spends $1,100 on coffee each year. There’s a lot one person could do with $1,100, including protecting current and future earnings. For as little as sacrificing a latte or two per week, you could purchase liability insurance and ensure your current and future assets are safe.
Liability insurance is what guards your effects. If something should occur where you are found at fault or sued, it’s your liability insurance that will safeguard everything you have worked for. On your auto insurance, the liability section is comprised of two different sections: bodily injury and property damage.
Bodily injury is what protects you in the event you’re involved in an accident that is your fault and someone is injured. Your auto insurance policy will cover the expenses up to the policy limit ($15k, $25k, $100k, $500k, etc.).
Property damage covers just that—property. If you damage someone else’s vehicle in an accident, municipal property, or any other “property,” your liability coverage will pay out up to the policy limits. Typically, this amount is lower than the bodily injury coverage.
With the cost of vehicles on the road today, it’s imperative you have enough coverage on your liability policy. A typical example of liability coverage on an auto policy will look like this:
15/30/5 (California legal minimum), 25/50/25, 100/300/50, 500/500/100.
To further break this down: the 15 signifies that the policy will only pay up to $15k for one person’s injury. If more than one person is injured, the 30 signifies the policy will not pay out more than $30k collectively for the injuries. The 5 signifies the policy will pay up to $5k for property damage coverage.
You might be thinking that liability insurance isn’t for you, especially if you’re young, don’t have a huge net worth, or a high-paying job. However, particularly in the state of California, it is imperative that everyone is protected, and here is why:
California can garnish future wages.
You may not feel like you have much to offer now, but think about all that you could accumulate throughout your lifetime. Not even this is protected from a lawsuit in the state of California. Drinking a few coffees per week at home is well worth the protection of your future livelihood.
It offers additional coverage.
Should an accident occur and someone is hurt, your auto insurance will cover the damages, but what about the medical bills? That’s where liability insurance comes in. Not to mention, liability insurance is helpful even in situations where you might not think you’re to blame. For example, if you are away at work and someone jumps your fence and takes a swim in your pool and is injured, who is at fault? You. Seems silly, but because it was an accident that occurred on your property, you are the responsible party. Having liability insurance will protect you from paying out of pocket.
We’ve established why liability insurance is important, but how much coverage does the average person need? We recommend the maximum protection. You should have a policy that will cover at least the amount of your net worth. Again, because the state of California can go after your future earnings, it’s also advised to add more to your policy to protect your upcoming assets.
In fact, we’d recommend an umbrella policy. In short, this type of policy covers everything above the limits of your regular property or auto insurance. For just around $150 to $225 per year, you can extend your liability policy.
If you have more questions regarding liability insurance, I’d love to speak with you today!
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