Liability coverage is the coverage for bad things that happen to other people because of you.
It could be in an auto accident where you’ve hurt other people or it could be someone getting hurt at your home. You have Insurance to pay for the actual medical expenses, lost wages, and “pain & suffering” that others experience in these situations.
But your policy will only cover you up to the coverage limits that you purchase. Often times people purchase low limits because they want to save money. But this can actually cost you a ton more money. WHY? Because if you’re in a liability claim and you don’t have high enough coverage limits, YOU”RE gonna pay the rest out of your own pocket. Tens of thousands of dollars that you wouldn’t have had to spend if you purchased higher limits.
So what kind of liability limits should you have on your insurance policies?
Let’s start with auto insurance
Auto insurance coverage is most commonly set up as “split limit” coverage. I suggest you have at least 100K/300K/100K split limit coverage. That means $100,000 of coverage per person in an auto accident, $300,000 of coverage altogether for injuries in an auto accident, and $100,000 of coverage for property damage to other people’s vehicles.
So 100K/300K/100K is absolutely the lowest I would ever let anyone have for coverage limits. I personally carry 250K/500K/100K. So I have $250,000 per person for injuries in an auto accident, 500,000 altogether, and $100,000 for personal property coverage.
For your home policy I would suggest a $500,000 liability limit with at least $5,000 of medical payments.
A personal liability umbrella is a great idea for adding even more liability coverage on top of your home and auto coverage limits.
So just to review:
On your auto policy the lowest liability limits you should have are $100K/300K/100K. On your homeowners policy the lowest your should have is 300K. The limits I carry are 250K/500K/100K and 500K for home.
So take a look at your own insurance policies and see if your coverage is up to speed. If it’s not, make sure you call your insurance agent and get it fixed.
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