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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