Wednesday, November 18, 2009

The biggest problem I see on auto insurance policies in Franklin TN is...

When I review prospective customers’ auto policies, perhaps the most common thing I see is this line item:

“Bodily Injury/Bodily Injury Total/Property Damage:”100/300/100”

Is this what your policy says? What does it mean?

It simply means you have liability coverage for the “other guy”. If you cause an accident and injure the other driver and his passengers, your insurance covers up $100,000 max per person (the other guy) up to a total of $300,000 for the medical injuries in an accident. So, you exhaust your coverage if there are three people injured in the other car, and their medical injury costs equal exactly $100,000 each. However, if one person has injuries costing $150,000, $250,000, or more, your liability insurance still only pays up to the $100,000 limit.

The last “100” refers to your insurance coverage limit for property damage. It pays for damage you cause to the “other guy’s” vehicle, plus other vehicles, and things like phone poles, buildings, etc., and maxes out at $100,000.

This “100/300/100” level of liability coverage may be adequate for some, but certainly not all. Just think of what could happen if you caused an accident, resulting in the other driver to have serious injuries and be confined to a wheelchair for the rest of their life. You better believe that person’s medical injuries, lost wages, and rehabilitation will far exceed $100,000, yet that is the per person limit of your insurance. Guess where the rest comes from? A big lawsuit, where your assets are at risk. And what if you hit an expensive Mercedes, which collides with a gas truck, which runs into building? That could easily exceed your $100,000 property damage limit.

So, the rule of thumb is to figure out “how much

you have to lose”, (meaning your assets like your house, car, savings, etc.), and make sure have your auto liability insurance matches that amount. For lots of people here in Franklin and Williamson County, this means they should look at liability limits of $250,000, $500,000, or even $1,000,000. Fortunately, getting higher liability coverage limits is not too expensive.

Also, if you have significant assets to protect, consider umbrella coverage, which can add $1 million, $2 million, and more on top of your existing auto policy limits. Don’t take for granted that you have sufficient auto liability insurance!

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