What Superlative Would Your Insurance Win?

Car insurance may not be all that glamorous, it probably would not win “Most Fun” in the high school yearbook and it may not be the hottest industry on the stage.  When the spotlight hits, though, it is undeniable what a star good insurance coverage can be.  Understanding the ins and outs of insurance can be complex, but it is of utmost importance to keep yourself educated about what your insurance policies are doing for you and how they will perform when you need it most.

Why Is it So Important? Like a good doctor, insurance is in place to heal you when you’ve been broken. It’s there to fix the worst case scenario. The goal of both medicine and insurance is to pick up the pieces and put them back together so that you look the same as you did before the loss occurred. Doctors may mend a broken arm or leg, while insurance fixes a broken car or home. What we must remember is that insurance is an important part of restoring your life, but it can be equally important when you are not the victim in an accident.

Car insurance liability limits are in place to pay for any bodily injury or property damage that you cause (and are found legally liable for) to another person. People often think that because they have insurance, they are covered, plain and simple. The fact is, though, that insurance has LIMITS. If the costs to rectify an accident fall outside of those limits, the victim may have no choice but to sue you for the remainder, causing you complete financial devastation. No bueno.

Want Some Examples?  My friend, [Low Limit] Lisa works for an NFL team and I recently discovered that her car insurance liability limits are shockingly low.  Her limit is 25/50/50: her insurance company will pay up to $25,000 to each person injured, but they will only pay a maximum of $50,000 total per accident (so they’ll only pay a max of $25K to two people) and they will pay a max of $50,000 for damage caused to property.  Let’s play pretend and imagine that she is pulling out of the player parking garage…

  • Lisa hits a player, damaging his $100,000 car and breaking his $10 million running back leg
  • Player sues Lisa for damages in court
  • To fix the car, pay for his medical bills and make up for the wages he is losing while out of work, the court awards $500,000
  • Lisa is now liable for $425,000 out of pocket
  • Superlative: Most Likely to Drive Lisa into Deep Debt for Decades

We may not all work for professional sports teams, but we do interact with people and face risks on a daily basis. This one is a true story:

  • My friend–we’ll call him Crash–was in a car accident last year
  • He was at fault for hitting a Mercedes-Benz operated by a NYPD detective
  • The accident wrecked the Benz, injured the detective’s shoulder, put him through surgery and rehabilitation and kept him out of work for 6 months
  • The court awarded the detective $90,000 in a settlement.
  • Crash’s insurance company paid for an attorney to represent
  • Crash’s liability limit was a Combined Single Limit (as opposed to the split limits of 25/50/50 we saw earlier) of $500,000
  • Superlative: Most Likely to Suffer NO Financial Loss

Another example:

  • A restaurant owner has a teenage son who drives his car into someone’s luxury home
  • Their insurance carries a $100,000 liability limit on property damage 
  • Homeowner sues and court awards $2 million in damages
  • Superlative: Most Likely to Foreclose Their Home and Sell Their Restaurant In Order to Pay the Remaining $1.9 Million

We never expect that we’ll be in such a position, but that is why insurance is so essential: it is our backup plan when the unexpected actually happens. Increasing your liability limits will cost a little more, but it is the smartest, easiest way to truly protect yourself and the life you’ve built in the event that the unthinkable occurs. Think of ways to cut back in other areas of your life–maybe you can put that Starbucks money toward having coverage that wins “Most Likely to Succeed.”

Talk to your insurance agent or call/e-mail us for guidance: 914-598-3004 or jaime@assetsecurityrm.com

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