Liability Coverage Explained
Updated: Jul 15, 2021
What does liability actually mean? I keep throwing these terms around in my blogs explaining only what's necessary to the topic. So, I thought I should explain a little better. Here's my example I use to explain liability limits on your auto insurance. Stay with me! I can already see your eyes roll into the back of your head. Don't fret, I'll keep it readable (hopefully). We honestly want you to understand what you are paying for, what it actually covers and why you have to have it.
Liability, in part, is to cover you in the event you are proven liable and have to pay for damages (damages can be property damage such as someone else's vehicle damage, telephone pole you hit, injuries to someone else, etc.) I've mentioned a few times about the requirement of insurance in the state of Minnesota. The law says that you have to carry the minimal coverage of 30/60/10 liability limits to be legal. What does 30/60/10 even mean? Here we go... 30/60/10 = per person/per accident/property damage. Now I'm going to explain why we, as an agency, won't write your limits that low.
Let's say you're driving and drive through a stop sign, hit another car and that car has 6 people in. You hit them so hard that you've pushed them into the ditch and their vehicle rolled over. What 30/60/10 means to you is in that scenario, the most your auto policy is going to pay out for the people in that car and the property damage to the car or any other property involved = $30,000 per person, or the most it is going to pay for that incident is $60,000 and the most it's going to pay to fix/repair or replace property damaged is $10,000.
Now, I mentioned 6 people in that car. Let's also say they are driving a new 2021 Lexus. Let's also say all 6 people are seriously injured and they sue you - again you carry $30,000 per person BUT the MOST your policy is going to pay is $60,000 as that is PER INCIDENT (means not all 6 are going to be covered). That doesn't even cover the cost of a emergency visit w/ambulance ride now days (I have not verified the ambulance information, I use only as an example). So the rest comes out of your pocket. Now, how about that brand new Lexus - pretty sure they are going to want your insurance to cover to get it fixed/repaired or replaced. On top of their car, you hit a telephone pole, which fell on the power lines. That's all property damage. Guess what - you only have $10,000 in coverage for property damage. I don't know much about cars, but I know you aren't replacing or probably even repairing that Lexus for $10,000. Let alone the power lines and telephone pole you caused damage to. So in this scenario, ouch. There's going to be a lot of out of pocket expense for you.
We won't write 30/60/10 here in our agency. We don't believe that's enough protection for anyone. Especially now days. And our job as agents is to make sure you are protected. We normally write our limits at 100/300/100. And actually the normal is quickly becoming 250/500/250.
There's more to the liability limits. I know, you thought that was it, huh? Nope... If you read or look back at my blogs, you'll see one I did on Minnesota no-fault (I recommend you read it) and explained what that was. That all had to do with the PIP (personal injury protection) part of your liability. What PIP really breaks down to is 2 things in regards to a MVA (motor vehicle accident), whether it be in your car or someone else's. 1. Medical - possible benefits from injuries you may sustain and 2. Non-medical such as loss of wages. A standard policy usually carries $20,000 medical and $20,000 non-medical. That's what I'm going to base my example on. We are going to use the same scenario, same incident as above.
So, we've discussed the person you hit and how your insurance may pay out to cover them. Now, what about you? I'll discuss your car and that damage in another blog - that'll be full coverage. We're going to say you only carry liability only, so the damage to your vehicle WILL NOT BE COVERED!
But, if you're hurt, there might be some coverage in place. Let's say you were jolted enough to cause some neck/back injuries and went to the Dr. or Chiropractor to be seen. You'll notice once you tell them you were injured in an auto accident, they now want your insurance policy information (even if someone else hit you!). That's right, it's possible that some of those Dr. bills will be covered under your AUTO INSURANCE not your medical insurance. May also be some mileage reimbursement available. Next, let's say you lost 3 days of work because of that injury. It's also possible to receive loss of work benefits to be paid out to you. See - the more you know!
1 more part. Are you still awake?? This is the last one I'll discuss here. The next part is called "Stacking". Stacking simply states that if you have more than 1 vehicle on your auto policy, you can "stack" those personal injury protection benefits to get more. For example - same scenario, but let's say you broke your back. Now you've had the ambulance ride, been in hospital for 7 days, you've had surgery, out of work for 6 months and the list goes on and one. Well, that $20,000 medical and $20,000 non-medical is no longer even close to enough to cover those losses. So "stacking" says you have 2 vehicles on your policy, so if stacking was chosen as an option (there is an increase in premium for this), then you now have $40,000 medical and $40,000 non-medical that you may be able to collect benefits from. Definitely lightens your financial burden if you are eligible.
We want you to understand those coverages, why and how they Protect What's Important. Let's make sure you're covered. Give us a call and let's have a conversation about those limits!