The State of Ohio mandates that you maintain at least $25,000 per person/$25,000 per occurrence Bodily Injury limits and $25,000 Property Damage limits. Is this enough for you? Most likely, it is not. How do you determine what are the best auto liability limits for you and your family? Let’s dig into this question and see if we can get a better idea of how to select liability limits.
First, what are liability limits? Auto liability limits are the most your insurance company will pay for damages you cause to another party in an auto accident. These can be broken down into Combined Single Limit (CSL), Bodily Injury (BI) and Property Damage (PD). A Combined single limit is one single limit of insurance for any damages you cause regardless of the type of damage and how many people are injured. This can be stated like: $500,000 CSL. Bodily Injury covers injuries you cause to another person in a car accident. These are typically displayed with a per person limit and an occurrence limit which is the most that will be paid in an accident regardless of the number of people injured). This can be stated like $250,000/$500,000 BI. Property Damage covers any damages caused to tangible property up to the stated limits. This can be stated like: $250,000 PD.
There are a number of options for liability limits that you can select. These range from the state minimum of $25,000(Bodily Injury per person)/$50,000(BI per occurrence)/ $25,000(Property Damage) to $1,000,000/$1,000,000/$1,000,000. There are a number of options in between such as $100,000/$300,000/$100,000, $250,000/$500,000/$250,000 and $500,000/$500,000/$500,000. There are also the Combined Single Limit options such as $300,000, $500,000, $750,000 and $1,000,000. Not all of these options are available with every insurance company and some insurance companies will have a number of additional options but these are all fairly common.
Why do I need to purchase anything besides the state minimum limits? The problem with purchasing state minimum limits is that you can be held personally responsible for any judgments in excess of the limits you have purchased. For example, let’s say you hit another vehicle and there is one person in the car. They have $100,000 in medical bills, lost wage, etc. and you totaled their car which was worth $40,000. If you have state minimum limits ($25,000/$50,000/$25,000), the insurance company would pay $25,000 towards the Bodily Injury (only one person was injured so we use the per person limit only) and $25,000 for Property damage. This would leave you with $90,000 ($100,000 - $25,000 = $75,000 and $40,000 - $25,000 = $15,000 in total $75,000 + $15,000 = $90,000) that isn’t covered by insurance which the injured party will then hold your responsible to pay. With the cost of modern medicine and the value of some cars on the road, state minimum limits provide very little protection indeed!
What limits should I purchase? Now we get down to the tough part: determining the best limits for you and your family. This is largely determined by your ability to pay the premium and your assets. The more premium you can afford, the better coverage you can get. In addition, the more assets you have the more another party can collect from you and so the more protection you need. Don’t forget that wages can be garnished in Ohio to pay for damages due to an auto accident! I recommend people start looking at limits in the $250,000/$500,000/$250,000 range as a minimum and go up from there based on their assets and ability to pay. You can always go by the “whatever make you sleep at night” Test as well.
When I was a claims adjuster for one of the companies we represent, I handled several claims that ended with bodily injury amounts totaling more than $500,000. These are not common claims but insurance is not designed to protect you from what you expect to happen but from what you don’t expect to happen. In addition, consider some of the vehicles you can see on the road and what they cost new like Ford F150 - $57,909 if that doesn't seem like much to you take a look at these cars: Lexus LS 460 - $82,305, Cadillac CT6 - $87,465 and Audi S8 4.0T - $115,900. If you have even $100,000 in Property Damage coverage it might not be sufficient if you get into an accident with one of these cars, let alone more than one car!
Let’s look at another important coverage: Uninsured/Underinsured Motorist coverage. This is often overlooking by most people but is arguably your most important auto liability insurance coverage. Uninsured Motorist coverage provides coverage when you are struck by another person that does not have any insurance coverage, the claim is denied or they flee the scene and cannot be located. Underinsured Motorist coverage kicks in when the person that hits you has lower limits than the Underinsured Motorist limits you have and your injuries exceed their limits. Here’s an example: You have $250,000/$500,000 (stated the same way, per person/per occurrence, as Bodily Injury) and the person that hits you has state minimum limits. You have $200,000 in medical bills. The other person’s insurance carrier will pay you $25,000 and your insurance company will pay the extra $175,000 and then try to collect that money from the other party instead of you.
Why is this coverage “arguably the most important auto liability insurance coverage”? It is the only coverage that pays for injuries that YOU suffer. Uninsured/Underinsured Motorist helps pay for injuries that you or your family suffer because of an accident caused by another party if they have no or insufficient insurance coverage. BI and PD pay damages to other people for which you are legally liable in order to protect your assets but BI and PD do not pay YOU. This is an important distinction and should be considered when selecting limits as you often cannot purchase Uninsured/Underinsurance Motorist coverage that is greater than you Bodily Injury coverage.
The most important thing you can do when you want to review your limits and what the cost would be to select the limits that are most appropriate for you is to contact the Frederick Agency today at 419-732-3171. We are here to help and would be happy to sit down with you and help you make this decision.
By Brennan Madison