Why Do I Need Liability Insurance On My Vehicle?
For one, it is the law. Many states require that drivers have some minimum amount of automobile liability insurance. The amount of coverage required may vary from state to state. In Colorado, the minimum amount of liability coverage is $25,000 per person and $50,000 per accident. Even if liability insurance is not mandatory in your state, it is still a pretty good idea to carry enough insurance coverage to protect yourself in the event you are at fault in an automobile accident.
To illustrate the importance of automobile liability insurance let us assume that you were driving with three passengers in your vehicle. You are momentarily inattentive and run a red light, striking another vehicle that is carrying a family of four. The three passengers in your vehicle are injured, along with the occupants of the other vehicle. A total of seven people are injured as a result of running the red light. Each of the seven injured people can sue you personally for their medical bills, pain and suffering, lost wages and a host of other damages.
If you had no liability insurance at the time of the accident, you could be held personally liable for the full extent of the damages caused by your negligence. Buying an automobile liability policy after you have had an accident is not the answer. Automobile insurance policies will not cover an accident that has already occurred. In addition, no policy will pay more than its policy limits. You may be personally responsible for any amounts owed the injured people.
If you have automobile liability insurance the insurance company is responsible for hiring a lawyer to defend you should you be sued by the injured people. However, if you have excess exposure (i.e., personal exposure that exceeds your policy limits), you should have your own personal attorney represent you. If an excess judgment is rendered against you, your assets (house, wages, bank accounts, vehicles etc.) may be subject to seizure or garnishment.
You should have enough insurance to protect the assets you have acquired. Your personal financial situation will dictate the amount of automobile liability insurance coverage that is adequate for you. An at-fault accident can have devastating financial consequences. Typically, a case will not be taken to trial if the defendant does not have adequate insurance to pay the judgment. However, in rare cases, if the defendant has personal assets, a case is sometimes brought. Therefore, make sure you have in place adequate automobile insurance coverage.
What Is UM (Uninsured Motorist Coverage) And UIM (Underinsured Motorist Coverage) And Why Do I Need This Insurance?
Colorado law requires that all drivers have at least $25,000 in automobile liability insurance coverage. But, what happens if your personal injuries and medical bills are more than the offending driver’s $25,000 policy? Unless the person causing the wreck has significant personal assets, you will not be able to recover the full extent of your damages. This loss can be devastating to you and your family. That is why UM or UIM Coverage is so important. In fact it may be the most important insurance coverage you can buy.
Essentially, Uninsured/Underinsured Motorist Coverage (UM/UIM Coverage) provides compensation to you, your family members and anyone occupying your vehicle, if you are injured by a careless driver who has no insurance or not enough insurance to cover your loss. UM/UIM coverage allows you to collect any additional compensation from your own insurance company, up to the limits of your UM/UIM coverage. Unless you have UM/UIM coverage, you may not be able to collect for your own personal injuries, medical bills, wage loss and other damages, if the other driver did not have enough automobile liability insurance.
If you already have automobile liability coverage, then you automatically have UM/UIM coverage up to the limits of your liability limits, unless you sign a document called a Waiver Form. The Waiver Form allows you to waive UM/UIM coverage, or select UM/UIM coverage at limits lower than your liability limits. We strongly suggest that you do not waive this coverage and purchase the highest limits available in order to protect you and your family. We have seen families financially ruined when the major bread winner is injured by an uninsured or underinsured driver. DON’T LET IT HAPPEN TO YOU!!!
Finally, do not rely on an insurance agent’s representation that you have “full coverage.” Full coverage does not necessarily mean you have UM/UIM coverage. We encourage you to pull out your insurance policy and check to see that you have adequate uninsured/underinsured motorist coverage. If you do not have UM/UIM coverage, then contact your agent, pay the additional premium and protect yourself first!
If you have a question concerning UM/UIM coverage, or need additional information, feel free to contact us. We will be happy to answer your question without charge. Drive safe, and be smart.
Do I Need An Umbrella Liability Insurance Policy?
Personal umbrella liability insurance financially protects you against a catastrophic lawsuit or judgment. It provides expanded liability coverage over and above your primary liability protection. It increases the coverage afforded under your homeowners/renters and auto insurance policies.
Do not assume that your automobile and homeowners insurance coverage provide you with enough liability protection. If you have significant assets you need to consider additional insurance coverage. A serious personal injury can leave you exposed to a financial exposure over and above your ability to pay.
These policies are generally sold to individuals who have significant assets to protect. Contrary to popular belief, these policies are not just for the very wealthy. Individuals with high or above average incomes may need this type of protection as well. High-income earners may face financial ruin if they are faced with a significant personal injury judgment that exceeds their limits of liability insurance.
Let us assume that you are at fault in causing a very serious motor vehicle accident that kills or significantly injures another driver. You have only $100,000 in automobile liability insurance on your car. The injured party has injuries and medical bills that exceed your $100,000 policy. Without an umbrella policy, you may be responsible for paying for all the injured person’s damages, over and above the limits of your $100,000 liability policy. An umbrella policy provides you with an additional layer of protection that would pay over and above the limits of your underlying policy.
An excess insurance policy will not only protect you if you are involved in an automobile accident, but also protects you in the event you are held liable for an accident that occurs at your home. As mentioned above, an umbrella policy expands the coverage afforded under your auto liability policy and your homeowners liability policy.
Without adequate insurance, even a high-income earning individual could be forced into bankruptcy by a judgment in excess of his available insurance coverage. If your assets exceed $100,000 you may wish to consider an umbrella policy.
How do I know if I should settle?