Why Buy Liability Insurance?
In the majority of the states, the law of tort says you're financially responsible
if you cause someone else to be injured because of your bad driving. This can be people in your own vehicle, any other vehicle you hit, or the people on the sidewalk or who own property next to the road. Although physical damage to property can be limited, the value of claims against you for personal injuries can be surprisingly large. Let's take the worst case of you hitting a top banker driving an expensive vehicle. The most you can be asked to pay is the replacement cost of the vehicle, but now think about the level of medical expenses and how much your victim may lose in pay while unable to work. Then come the damages for the pain and suffering. How many zeros do you see on the value of the claim? Now, of course, there would be little risk to you if you live in rented accommodation, have no assets and a job with a minimum rate of pay. Other than the amount of cover from your insurance policy, there's little risk to your life. But if you do own your own home, have savings and a reasonably good job, you are now a target. If you lose the case, the court can order your home sold, your savings confiscated and garnish your pay leaving you a bare minimum to live on. It's at times like this you wish you'd had a reasonable amount of liability insurance. Remember, you are liable to pay even if you have insurance. Whatever is left owing after the maximum is paid by your insurer comes out of your pockets.
This explains why basic liability insurance is mandatory in all but three states. All drivers should be able to offer a minimum amount of money to make good the losses. For example, in Wisconsin the liability minimums as from 11/1/2011 are 25/50/10, i.e. $25,000 as the maximum contribution to medical expenses if only one person is injured, $50,000 as the maximum is several people are injured, and $10,000 to repair damaged property. If your reaction to these figures is surprise at how low they are, you might want to consider buying more than the minimum amounts if you have assets to protect. Some states also make it mandatory to carry uninsured motorist cover while the states running a no-fault system also make it mandatory to carry personal injury protection to pay for your own medical treatment or, in the worst cases, your funeral expenses.
When it comes to estimating whether to buy cover on top of the minimums, it all comes down to a guessing game. Obviously, no one wants to be involved in an accident but, should the worst happen, you want enough insurance so you sleep well at nights. It's worth paying a little more in premium installments to avoid the stress of court cases against you personally. Auto insurance is all about sharing the risks with the other drivers on the road. Only a small percentage are ever involved in accidents so, when the losses are divided among all, the auto insurance rates are relatively low.
by: Haz Duell
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