How Important Is Liability Insurance?

But if he is hit by a civil lawsuit relating to the crash on February 7, he could face losing millions of dollars – and may even experience financial ruin due to his ‘low’ insurance coverage, it is claimed.”

The quote above is from a U.K. Daily Mail article referring to a famous, multi-millionaire celebrity who caused a car accident earlier this year. The “low” coverage that he had on his policy was a cap of $250,000 for injury caused in any one accident. That may seem like a lot, and statistics show that most car accidents are settled for far less than this, but unfortunately in this circumstance someone was killed.

The celebrity being referred to? Caitlyn (formerly Bruce) Jenner.

Don’t Skimp on Your Auto Insurance Liability Limit

Many of you may remember hearing or reading about this accident. I bring this up because lately I have had a number of auto policies for prospective clients come across my desk that only carry state minimum liability limits, which cover just $25,000 for any injury that is caused in an accident. Many times, the prospect will tell me they went with the policy because the rate was “dirt cheap”. Unfortunately, in today’s world, auto insurance has been turned into a commodity, something that is marketed as only a number and not one of the most important insurance coverages you can carry. Many people won’t buy other products that are dirt cheap because of low quality, so why would purchasing dirt cheap auto insurance make any more sense? That’s not to say that auto insurance has to be expensive. Rather, you have to think that a cheap policy is cheap for a reason.

 If you have read our newsletters, or talked to anyone at our agency lately, you know how much we stress the need for proper liability protection, both personally and for your business. Caitlyn’s policy at the time of the loss actually had high limits compared to what most people carry! Many companies will only write coverage up to $500,000 when it comes to injury in an accident. The issue here is that if the injuries that are caused end up costing more than the policy limit, lawyers will go after the responsible party to make sure all costs and damages are covered.

But what a lot of people don’t realize is it’s not just the medical cost they’re looking for reimbursement for. They can go after the responsible party for lost wages, rehabilitation, pain and suffering, funeral expenses, and a list of other ailments that seemingly have no cap. Imagine a worst-case scenario. If the person you injure or kill is the breadwinner in the family, and they happen to make millions of dollars a year, don’t you think their family would want to be properly compensated for that person no longer being able to provide for the family? In the areas our agency deals in a lot, New York City and Westchester county, this is a small, but distinct, possibility.

Add Your Automobile to an Umbrella Policy

“…he may be left in a precarious position if Ms. Howe’s family chooses to file a civil lawsuit against him. In such a case, ‘the sky’s the limit with what a jury could award,’ one attorney said.”

What Caitlyn needed to have in order to help protect her assets better was an umbrella liability policy. This policy could have provided millions of dollars of additional coverage for her, at a relatively low cost, so if a civil suit is brought against her there may not be a risk of her having to dip into her own personal assets to cover the judgement. And sometimes, if a person has proper coverage, lawyers and insurance companies may try to settle within the limits of the policy because they know they’ll be able to get the reward, as opposed to having to worry about someone not being able to make the payments, or the responsible party having their wages garnished for years. Perhaps the responsible party is an older individual and they end up passing away before the reward is completely paid. Then it becomes the family’s responsibility to continue to make payments. So having improper liability protection not only puts you at financial risk, it could put your kid’s financial future at risk as well.

Thank god they settled within our limits

This quote comes from a current client of mine. Years ago his wife, while parallel parking, accidentally backed into a pedestrian, shattering her leg. At the time he had an auto policy with a very famous insurance company, with “only” $500,000 in liability. To this day he tells me he’s thankful the claim was able to be settled within that limit because he wasn’t sure what they would’ve done if they had to dip into their savings and investments. Shortly after this, he switched his auto insurance to us and added the car to his umbrella policy.

Obviously what happened with Caitlyn Jenner is an awful situation, and the poor woman that passed away is the victim here. But what this illustrates is that this could happen to anyone. Caitlyn has potentially millions of dollars to help pay for any judgement. Most of us don’t have that luxury. Call a professional who can help make sure you are properly covered, while at the same time working with you and your budget.