Insurance companies offer many types of car insurance policies that provide different levels of coverage and deductibles. Liability limits in an auto insurance policy are stated as a combination of numbers such as 20/40/10. This means that you have:
- bodily injury coverage for losses up to $20,000 per person
- bodily injury coverage for losses up to $40,000 for all injuries which are the result of a single accident
- property damage of $10,000 per accident
Many states require you to have a minimum amount of coverage before you can drive a vehicle in that state. Check with your state’s insurance department or your insurance company to determine your state’s minimum coverage amount.
Consumers should be aware that a state’s minimum liability amounts are often far below what may be needed in an accident situation. Limits of 100/300/100 or 300/500/300 are examples of more typical amounts of liability coverage. The general rule of thumb in determining what limits to purchase should be tied to the amount of assets you have as victims of an accident that is your fault could come after your personal assets (home, bank accounts, etc.) once your policy limits have been reached.
While a policy limit of 100/300/100 may seem high to some, medical bills and damage to vehicles quickly add up. In many cases, the premiums you’ll pay for higher limits are not substantially greater than those you’ll pay with minimum limits. Talk with your insurance agent to determine what amounts work best for you.
When shopping around for auto insurance, make sure not to base your decision on price alone. Other factors to consider include the insurer’s reputation in the community, their record of paying claims on time, their customer service and how they are ranked according to insurance rating agencies such as Standard & Poor’s or A.M. Best.