How much car insurance do I need?
Because I am a personal injury lawyer who represents injured victims, I am often asked by friends and family about insurance issues.
One of the questions I am most frequently asked is “how much automobile insurance do I need?” Well, like most questions of an attorney, the answer is “it depends.” First, we probably need to identify what kind of car insurance coverage we are talking about having “enough” of. While there are several different coverages available to you when you buy car insurance, some required by Florida law and some optional, the coverage most people are thinking about when they ask “how much” is their bodily injury limits in their automobile insurance policy.
Bodily injury or “B.I. coverage” is available to pay for the medical expenses, lost wages, and non-economic damages like pain and suffering for someone you are legally obligated to pay following a car accident in which you were at-fault or at least partially at-fault. Depending on the severity of the injuries sustained by the other party or parties, the damages that you could be responsible for paying could be very, very, significant. The exposure you could face for bodily injuries sustained by others in an automobile crash that is your fault greatly exceeds the likely exposure for all other types of damages sustained by others.
For example, if you “total” someone else’s car, your exposure for property damage is limited to the value of that vehicle. If the crash results in the other party suffering injuries so significant they can no longer work and will need a lifetime of medical care and treatment, your exposure will likely be many, many times the amount of property damage sustained.
So, how much bodily injury coverage do you need? I often read that a good rule of thumb for the amount of bodily injury coverage one should have is an amount that is equal to that person’s net worth. If your personal assets exceed your debts by $500,000, then you should buy $500,000 worth of bodily injury coverage. The rationale behind this approach is that if you are in a crash that is your fault, you want to have enough bodily injury coverage to protect your personal wealth.
In the decades I have been responsible for purchasing my own car insurance, I never recall being asked by any insurance professional what my net worth was when discussing bodily injury limits. I am not suggesting that a net worth approach to bodily injury coverage is inappropriate. I am suggesting, however, that it is incomplete. Why? The analysis ignores the impact of another critically important type of insurance coverage available to you: uninsured/underinsured motorist or “U.M. coverage”. U.M. coverage protects you, your passengers, and certain members of your family for bodily injuries you sustain in a car crash caused by someone else who has no or inadequate bodily injury coverage.
U.M. is the flipside of B.I. coverage. B.I. protects you for injuries sustained by others. U.M. protects you for injuries you sustain that are caused by someone else. The sobering fact is that Florida, and particularly, South Florida, perennially ranks at or near the top for most uninsured motorists. http://www.marketwatch.com/story/the-state-with-the-highest-rate-of-uninsured-drivers-is-2015-01-16. If you are involved in a motor vehicle collision, there is high risk that the other driver will not have enough bodily injury coverage for you and your passengers if you are seriously injured.
What does B.I. coverage have to do with U.M. coverage? By law, your car insurance carrier must offer you the option of purchasing uninsured motorist coverage in an amount equal to the bodily injury limits you select. For example, if you elect to buy $100,000 in bodily injury coverage, you can purchase up to $100,000 in U.M. coverage.
Finally, getting back to our original question of how much bodily injury coverage should you buy, the answer is: “how much protection do you want for bodily injuries that you may suffer in an accident that is not your fault?”
Remember, the greatest exposure in an accident is not the property damage, but for the people involved in the crash. By buying higher bodily injury limits, you are entitled to buy higher uninsured motorist coverage limits. And you should. The damages you and your passengers might suffer in an accident bear no relationship to your net worth. Given the amount of uninsured motorists you are likely sharing the road with, make sure you are protecting yourself as best you can from their potential negligence, as well as your own. Also, when buying uninsured motorist coverage, elect to buy “stacked” U.M. It’s a relatively inexpensive option and can significantly increase the U.M. benefits available to you should you need it.