What Are The Right Limits To Carry On Your Car Insurance?

What Are The Right Limits To Carry On Your Car Insurance?

Brad Hagar posed a great question to us the other day that is worth sharing with everyone. "Why do I need to carry higher limits then what the state requires me to carry? Isn't 25/50/15 good enough"? We get this question about liability coverage quite often. Colorado's laws have a lot to do with the answer , and it's definitely an aswer that everyone should know.

A few years back , Colorado became a “tort” state , meaning whoever causes the damages in a car accident is responsible for paying ALL the bills that result from the crash. All medical , rehabilitation , work loss , pain and suffering , as well as fixing any cars or other property you damage. The state requires that you carry liability coverage in the amounts of $25 ,000 for an injured person , $50 ,000 for total accident injuries (in case you injure more than one person) , and $15 ,000 to repair or replace any property you damage.

Obviously , $25 ,000 won’t go very far if someone is seriously injured in an accident. That amount can be spent before a crash victim even gets out of the emergency room. Factor in a stay in the hospital , missed work and rehabilitation and you could easily be faced with a bill of $100 ,000 or more. As far as fixing cars and other property you may damage , how far is $15 ,000 really going to go? How much did you pay for your last car? If it was less than $15 ,000 , you are the exception , not the norm. The average car cost in the United States is $28 ,400 – a full $13 ,000 above the state required minimum on your car insurance.

If you are carrying the state required minimums and you cause a serious car crash , what will happen? Once injuries or damages exceed your policy limits , your insurance company is no longer responsible for the rest – but you still are! If someone has $100 ,000 worth of medical bills , and your insurance company has paid the first $25 ,000 (your state required minimums) , YOU will have to pay the other $75 ,000 still owed. In Colorado , if you do not have the $75 ,000 than the state will garnish your wages , put liens on your property , and do whatever else they need to in order for you to pay the full amount. The same holds true for damages you cause to property; if the amount of damage is over your $15 ,000 limit , the rest will come out of your pocket.

So , why should you carry limits higher than the state required minimums? Because paying a few extra dollars per month for higher limits can save you thousands (or hundreds of thousands) of dollars if you are the cause of a serious car accident. Even if you are younger , or don’t have many assets yet , higher insurance limits will help protect your earnings by making sure your paycheck does not get garnished to pay any outstanding judgments against you.

Talk to your local , professional insurance agent to see which insurance limits are right for you. No one means to cause an accident , that’s why they’re called accidents and not on-purposes , but if you are the cause of an accident , make sure you have enough insurance to pay ALL the damages. After all , that’s what insurance is for.

By Robert Edgin

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