One Car Accident Could Put Years of Savings at Risk
If you're involved in a car accident that seriously injures another driver. The injured driver faces substantial medical bills, lost income, and potentially years of ongoing treatment.
Their attorney calculates the damages, including medical expenses, future treatment costs, lost wages, and pain and suffering, and demands $250,000 in compensation.
But what if you only carry Texas's minimum bodily injury liability coverage of $30,000 per person?
If you're found legally responsible and the final damages are determined to be $250,000, the remaining $220,000 could become your personal financial responsibility.
Of course, this doesn't mean the other party can simply take everything you own. In Texas, a qualifying primary residence (known as a homestead) generally enjoys strong legal protection and typically cannot be forced into sale to satisfy an ordinary car accident judgment.
However, bank savings, regular investment accounts, and real estate that doesn't qualify for homestead protection may be subject to collection efforts.
As Your Wealth Grows, Has Your Insurance Kept Up?
If you don't have significant assets and you're working with a tight budget, choosing minimum liability coverage may be a reasonable financial trade-off. Many people start with minimum coverage when they first begin working, simply to keep their expenses manageable. That's understandable.
But a few years later, your income may have increased. Perhaps you've purchased a home, built up your savings, or started investing. Yet your auto insurance liability limits may still be exactly where they were when you bought your first car.
For households with accumulated assets, I generally recommend comparing bodily injury liability limits of at least $100,000 per person, or higher. If you have substantial assets, a personal umbrella insurance policy may also be worth considering.
Some customers assume that doubling or tripling their liability limits will double or triple their premiums. Fortunately, that's not necessarily the case. Increasing your bodily injury liability limit from $30,000 to $100,000 per person may cost as little as an additional $10 per month. Actual pricing varies by driver, vehicle, insurer, and coverage selection.
That's why I encourage customers to compare actual quotes for different coverage limits before making a decision, rather than automatically choosing the minimum to save a little money.
What Is Umbrella Insurance? Does It Cover Everything?
Personal umbrella insurance provides an additional layer of liability protection above your underlying policies, such as auto and homeowners insurance.
For example, imagine you're responsible for a serious car accident and the final damages total $1 million.
Your auto insurance provides $300,000 in applicable liability coverage, and you also carry a $1 million personal umbrella policy.
That means you could have up to $1.3 million in combined liability protection for a qualifying claim. In this example, after the auto policy pays its applicable $300,000 limit, the umbrella policy could cover the remaining $700,000.
But umbrella insurance doesn't cover everything.
It generally does not pay for damage to your own vehicle, damage to your own property, or your personal medical expenses. Its primary purpose is to provide additional liability protection, not to replace your auto, homeowners, or health insurance.
Umbrella policies also have exclusions and coverage requirements. In most cases, you'll need to maintain certain minimum liability limits on your auto and homeowners policies before qualifying for umbrella coverage.
For families who have worked hard to build their assets, umbrella insurance is worth considering as part of an overall insurance strategy.
Its purpose is to help protect your financial future from the potentially devastating cost of a serious liability claim.
Our Recommendation
Buying insurance isn't about choosing the most expensive policy or finding the absolute cheapest one. It's about making sure your coverage matches your current financial situation.
If you own a home, have savings, or hold other investments, now may be a good time to review your auto insurance liability limits. Are you still carrying the same minimum coverage you selected when you first started driving?
At Zip Insurance, we can help you review your current coverage, compare different liability limits and premiums, and explore whether additional protection makes sense for your household.
Protecting the wealth you've worked hard to build is just as important as building it in the first place.
Call Zip Insurance today at 832-460-5669. Let us review your current policies and help you determine whether your liability protection should be updated.
