Higher Liability Limits: Why Too Little Liability Coverage is a Big Problem

I’m not a millionaire, therefore there’s no point for me to have an umbrella policy.

It’s against the law to drive without car insurance of some sort, so there can’t be that  many uninsured drivers with a car.  

Why should I have to pay the extra price if I am in fact hit by someone with state minimum/no insurance? It’s not my fault they don’t follow the law.

Sound familiar to you? Perhaps these thoughts have crossed your mind (or are even said!) whenever your insurance agent has suggested higher liability limits, or an umbrella policy be added to your home and auto coverage. Many carry the dangerous mentality of “this won’t happen to me.” The unfortunate truth is catastrophic accidents do happen, whether vehicular or otherwise. Moreover, there is a 1 in 7 chance you can be involved in a car accident with a person who has little to no insurance. Probably a much higher possibility than you thought, right?

Devastatingly, these types of accidents have occurred in our own small community (some of which result in tragic deaths), too often to the point where we thought it was time to explain the benefits of an umbrella policy. So what’s a person to do if you are caught in a run-in with an uninsured/underinsured driver? More importantly, why can having higher liability limits be the element that has your insurance company paying the high costs (instead of your wallet)?

Personal Catastrophe Liability (otherwise known as an Umbrella Policy)

What exactly is an umbrella policy, and how does it come into play if involved in an accident with an uninsured driver? According to Erie insurance blogger Amanda Prischak, “An umbrella policy provides an extra layer of liability protection over and above both your auto and homeowners policies. It covers you if you’re sued because of an accident.” For the purposes of this article, however, it is important to note that an umbrella policy can also provide protection if you are ever hit by an uninsured/underinsured driver. When you have an umbrella policy, you have the ability to add two things: underinsured/uninsured motorist bodily injury protection and property damage protection. According to Erie blogger Abby Badach, underinsured/uninsured motorist bodily injury protection “covers damages that you and the passengers in your vehicle sustain when an uninsured (or a hit-and-run) driver is at fault.” Underinsured/uninsured property damage protection “pays for your vehicle repairs or a replacement car if you’re hit by someone without any or enough insurance coverage.”

Let’s take a look at a hypothetical scenario:

What if you were involved in an accident with someone who only had state minimum or no insurance, and you were left with $18,000 in car damages and $50,000 in medical bills? The underinsured driver at fault certainly would not have enough insurance deductibles to cover you in the event of an accident. Consequently, your regular auto policy deductibles would only be able to pay so much of those expenses before you would be asked to pay the rest of the hefty bills. That’s where your uninsured/underinsured bodily injury protection and property damage protection come into play. With that extra protection, you wouldn’t have to worry about being stuck with a huge stack of bills for an accident that was not your fault to begin with.

Don’t think that this extra protection means the law breaker gets off the hook.

Though your umbrella policy is the one to pay whatever damages remain, these uninsured/underinsured drivers certainly don’t get away with what they’ve done. They can face penalties such as the suspension of their license, points on their license, traffic tickets, and large fines. Trust us; they will feel the backlash from their careless decision of having little to no insurance.

Aren’t sure how much coverage you do need to be properly protected in the event of a terrible event such as this?

Not to worry! Leland Smith insurance agents are happy to take a look at your overall assets and already existing coverage to make sure you get proper protection that is both affordable and crucial if something like this were to ever happen to you. Also, here is a very short video explaining this type of coverage:

 

 

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