Tuesday, January 11, 2011

Appropriate Levels of Auto Insurance

2011 is a good time for me to re-emphasize that you should not compromise on the liability portion of your auto insurance policy. In the over 28 years that I have been practicing law, I have had an unfortunate and reoccurring situation with new clients. Many of them have arrived for their first meeting without knowing that it was simply a bad idea to try to save a few bucks on insurance premiums by skimping on the liability coverage in their auto policy. In our present economy we are all trying to save money and spend it where it is most needed. 

There are two good reasons why you should keep your liability limits set high. The first is that failure to do so may expose you to personal liability due to damages you are responsible for which are in excess of the coverage you have bought. Of course none of us think we will get into an accident, especially one that we cause, but you acknowledge that it is a possibility when you buy insurance in the first place. We are all human and we all are capable of making a mistake that can cause an accident. Given that and the fact you correctly decided to purchase auto insurance, make sure you buy enough insurance to cover what is considered your reasonable exposure.

A fascinating American Automobile Association report from March 5, 2008, states that the average crash costs of an automobile injury accident in 2005 dollars was $68,170. Given this fact, why someone would take comfort in having $25,000 or $50,000.00 in liability coverage is simply beyond me! You are not reasonably protected and cannot provide an adequate insurance payment to someone whom you may injure in an accident. Let me suggest that if you have a $25,000 or a $50,000 liability limit, your discussion with your insurance broker should begin with whether $100,000 is an adequate minimum amount you should consider or whether, to begin to really protect yourself from a liability exposure from a third party’s claim which is not covered by your insurance, you need to consider $250,000 or $300,000 to have the coverage you should. (Of course, for many people with substantial assets, the next topic for discussion is an umbrella policy, but that is a topic for another day.)

There is another very important reason that you should be thinking in these terms. When I say that you are not protected, I really mean that in two ways. The first, as stated, is that even with $50,000 worth of coverage, you simply do not have adequate coverage to provide funding if someone has even the average level of cost of injury by 2005 standards. But even more important to you is that if you are the injured party, as my clients often are and the responsible driver has skimped on liability insurance and so have you, the resources available to make you economically whole are minimal. On the other hand, if you have protected yourself in the manner that I am suggesting here, you not only protect yourself from the exposure created by another’s claim, but you can help yourself in the event the other party cannot.

This is because under New Hampshire law, the liability limit on your policy automatically sets the minimum limit for the underinsured and/or uninsured coverage on your policy. Therefore, if you have a $300,000 liability limit on your auto policy and are injured by someone who only has a $25,000 liability limit and no assets, we can pursue your claim to the $300,000 threshold under your own policy despite the grave limitations presented by the lack of adequate coverage in the responsible driver’s policy.

Unfortunately, I have found over the years that as often as the responsible driver has skimped on their coverage, so has my client, thereby losing the double protection you would gain by having adequate liability coverage. Your particular circumstances should be reviewed with your insurance broker and you should raise the questions about your liability limit and the underinsured/uninsured portion of your policy.

 If either you or your broker have any questions, give me a call and I will happy to help. Just please do not end up being another in the long line of clients who have come to me after they are seriously injured in an auto accident, only to discover that they are limited to a $100,000 recovery on their $300,000 claim because they skimped on their premium to save a few bucks.

Timothy G. Kerrigan is the director of Kerrigan Law PLLC. His present practice focuses on civil legal matters including insurance, , personal injury, family law, commercial transactional issues, litigation, mediation and arbitration  Mr. Kerrigan is also certified by the State Office of Mediation and Arbitration both as a mediator and as an arbitrator. You can contact Attorney Kerrigan at 603-943-5555