Author Topic: Car insurance liability limits?  (Read 17878 times)

Jack

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Car insurance liability limits?
« on: November 15, 2012, 02:46:28 PM »
My car insurance is up for renewal, so I thought I'd ask for advice. I'm 28, married, have a mostly clean driving record, and own 2 vehicles:
  • 1998 VW Beetle TDI
  • 1996 Ford Ranger 4x4

My insurance broker shopped around for me and determined that the best deal is sticking with my current company, with the following coverage options:
  • $481 for $100K combined single limit liability + uninsured motorist + collision ($1K deductible) + comprehensive ($500 deductible) + roadside assistance (this is what I have now)
  • $404 for same as above minus collision
  • $313 for $100K combined single limit liability + uninsured motorist only
  • $348 for 100/300/100* liability + uninsured motorist only
  • $417 for 250/500/100* liability + uninsured motorist only
  • $515 for 100/300/100* full coverage (like choice #1 above)

I had kept the collision and comprehensive because I didn't have enough cash on hand to replace the cars until recently (due to unemployment). Obviously, I'm going to drop that now. (I'll have to sign up with AAA for the roadside assistance; my cars are unreliable enough due to age to need it.) The question is, how much liability should I have?

I'm leaning towards choice #3, but my broker thinks I'd be underinsured. Is he right, or just trying for a bigger commission?

(* "x/y/z" notation means $x thousand per person bodily injury, $y thousand total cap per accident, $z thousand property damage)

(Edited because I forgot that uninsured motorist coverage is included in all options too.)
« Last Edit: November 15, 2012, 03:24:18 PM by Jack »

Another Reader

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Re: Car insurance liability limits?
« Reply #1 on: November 15, 2012, 03:30:06 PM »
In my view, you would be substantially underinsured.  One accident where you are deemed at fault could wipe you out.  Injure someone seriously, and you could lose over a million in a lawsuit.  Option 5 is the minimum liability level I would consider.

grantmeaname

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Re: Car insurance liability limits?
« Reply #2 on: November 15, 2012, 05:36:26 PM »
Option 3 is what I'd go for. Of course, I live in a batshit state where state minimum coverage is like $10k/person and $25k/incident, so even your smallest option seems incredibly large to me. I'm not so sure that million dollar lawsuits are that common. Also, I think its rarer for you to be sued beyond full insurance coverage, especially if that amount is as generous as $100,000-- garnering wages seems cruel to many, for one thing, and is an ineffective and slow way to get paid back, for another. If you were really worried, I guess you could look at an umbrella policy above and after your (already generous) auto insurance.

Its good that you've got uninsured motorist coverage. Does it include underinsured motorists as well?

Paul der Krake

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Re: Car insurance liability limits?
« Reply #3 on: November 15, 2012, 05:49:44 PM »
I understand that carrying state minimums is risky in the event of an accident (say I crush a Jaguar), but how how exactly could they get anything out of me if I don't own a house or a fancy car? Does the court allow them to lookup my salary? What about money invested in IRAs/401ks, is that accessible to them to?

Jack

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Re: Car insurance liability limits?
« Reply #4 on: November 15, 2012, 06:04:39 PM »
Also, I think its rarer for you to be sued beyond full insurance coverage, especially if that amount is as generous as $100,000-- garnering wages seems cruel to many, for one thing, and is an ineffective and slow way to get paid back, for another. If you were really worried, I guess you could look at an umbrella policy above and after your (already generous) auto insurance.

[H]ow how exactly could they get anything out of me if I don't own a house or a fancy car? Does the court allow them to lookup my salary? What about money invested in IRAs/401ks, is that accessible to them to?

Those are the main questions I had. My insurance broker's concern was that I'm young and therefore my potential future earnings are large.

Its good that you've got uninsured motorist coverage. Does it include underinsured motorists as well?
Yes.

Lazyretirementgirl

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Re: Car insurance liability limits?
« Reply #5 on: November 15, 2012, 06:22:14 PM »
Jack, if you do not have a lot of assets, like a home, 100/300 is likely enough. If someone gets a judgment against you, in most places they can access information about your income in some type of debtor's exam under oath. However, as a practical matter, your insurer in many states cannot pay your policy limits in settlement without getting a full release of the claims against you, so most lawyers will be unlikely to hold out for the chance to garnish your wages after a trial. There is the occasional nutjob, though.

Having said that, ask your agent about an umbrella policy. It sits above your basic limits and only kicks in on a larger claim, so is usually cheaper, and providesbroader coverage as well as higher limits.  As to your IRA issue, I think it cannot be seized to satisfy a judgment, but I am not positive. If that is your major asset, you should look into this more closely.

Jack

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Re: Car insurance liability limits?
« Reply #6 on: November 15, 2012, 08:13:59 PM »
Jack, if you do not have a lot of assets, like a home, 100/300 is likely enough.

There's a listing of my assets here. What do you think?

However, as a practical matter, your insurer in many states cannot pay your policy limits in settlement without getting a full release of the claims against you, so most lawyers will be unlikely to hold out for the chance to garnish your wages after a trial.

I'm not sure I understand what this means. Are you saying that if you get a judgement for more than your insurance coverage, that the insurer doesn't pay out at all?

chucklesmcgee

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Re: Car insurance liability limits?
« Reply #7 on: November 15, 2012, 11:07:05 PM »
I understand that carrying state minimums is risky in the event of an accident (say I crush a Jaguar), but how how exactly could they get anything out of me if I don't own a house or a fancy car? Does the court allow them to lookup my salary? What about money invested in IRAs/401ks, is that accessible to them to?

As a practical matter, it's very difficult to collect on a judgement against someone, especially if they don't have assets. You don't seem to be flashing around a lot of wealth, so it's unlikely a tort lawyer would really be especially interested in going after you. Insurers tend to settle for around 50% of damages. In tort claims, you typically authorize release of policy limits to the opposing side. They will frequently perform a public asset check, which will pull up your house and car and maybe some other things, but not salary, though they might snoop around on the internet and figure out your occupation from there.

Insurance is basically a tax on you for consequences you cannot afford. On average, for every insurance option you purchase, the insurer will take in more in premiums than it pays out in claims- kind of like a lottery organizer. (And you don't play the lottery often, do you?) Uninsured/underinsured motorist coverage is pretty silly in my opinion. You're driving two beater cars and you're willing to waive collision insurance, meaning you can afford to pay for repairs/a new car. What difference does it make if someone else does it? I'm assuming you have health insurance as well, so you'd be able to afford the cost of care if you're in an accident. Paying extra every month for a consequence you can afford is just silly.

Insurers ALWAYS love to tell their customers they're under-insured. It's very easy to prey on fears to make people pay out way more to avoid the extremely improbable. Another Reader claims you're underinsured, since tort claims can reach well over a million. Well, many tort claims can get over $10,000,000- are you underinsured if you don't also have an enormous $10,000,000 umbrella policy as well?

It's tough to determine appropriate liability limits, but I think you'll be fine with $100k. It's probably fair to have your coverage close to your net worth, because it's very easy to repossess a home and other assets. The median tort payout in Fulton County, GA over the last 10 years was just $7,000. Enormous vehicle accident tort payouts usually only occur when a corporation gets sued or if there's reason to believe the defendant was really behaving recklessly (like a drunk driver) or is really wealthy.


Is that cost per 6 months? Also why are you using a broker to get car insurance? I'd shop around a bit and also get a quote for option 3 minus uninsured motorist.

offroad

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Re: Car insurance liability limits?
« Reply #8 on: November 16, 2012, 05:10:29 AM »
You need to weigh the risks. Chance of getting in accident 5%. Chance of heavy judgement because you blatantly injured someone. 1%.   Chance of getting more than your coverage 20%. Chance of garnishing wages 5%. Chance of bankruptcy not protecting your assets 0%.

All made up numbers. But the result is multiplied.

Chance of car accident killing you is higher than all this.

Point is focus more on life insurance and disability insurance. Less so on liability to others.

Wish we had an honest to goodness actuarial to run the numbers.

chucklesmcgee

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Re: Car insurance liability limits?
« Reply #9 on: November 16, 2012, 05:57:24 AM »
You need to weigh the risks.

Wish we had an honest to goodness actuarial to run the numbers.

I assure you that at every coverage level, odds are that you'll spend more in premiums that you'll take out in claims.

Jack

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Re: Car insurance liability limits?
« Reply #10 on: November 16, 2012, 06:00:56 AM »

It's tough to determine appropriate liability limits, but I think you'll be fine with $100k. It's probably fair to have your coverage close to your net worth, because it's very easy to repossess a home and other assets. The median tort payout in Fulton County, GA over the last 10 years was just $7,000. Enormous vehicle accident tort payouts usually only occur when a corporation gets sued or if there's reason to believe the defendant was really behaving recklessly (like a drunk driver) or is really wealthy.

Point is focus more on life insurance and disability insurance. Less so on liability to others.

Good points all, thanks. By the way, where'd you come up with that "median tort payout in Fulton County, GA" figure?

Is that cost per 6 months? Also why are you using a broker to get car insurance? I'd shop around a bit and also get a quote for option 3 minus uninsured motorist.

Yes, that's the cost per 6 months. I'm using the same broker for my car and my homeowner's insurance, and I'm doing so because he's the same broker my parents have used for probably 30 years now (well actually, the son of the same broker, but whatever). In other words, it was the easy (lazy) decision.

Why, do you think I'm getting ripped off? When I've heard anecdotes about what other people pay for car insurance, I've felt like I was getting a decent deal in comparison...
« Last Edit: November 16, 2012, 06:04:31 AM by Jack »

ashem

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Re: Car insurance liability limits?
« Reply #11 on: November 16, 2012, 08:34:26 AM »
Hey Jack,

I was recently a juror on a trial in Dekalb County and found this interesting.

There was a car accident and only 2 people involved. The man was at fault, but was underinsured ($25,000 coverage). The woman's airbags broke her wrists and she had to take 5 weeks off of work and move home to live with her parents. She had surgery and physical therapy bills on top of the loss of work. His lawyer was trying to convince the jury that $25,000 covered her loses, which included $4,000 for pain and suffering. Her lawyer wanted $80,000. The jury decided to award her $30,000.  In the end, we found out it was not the individuals, but the insurance companies who brought the case to court. Her uninsured motorist coverage had already paid her $80,000 and his insurance company reimbursed them $25,000.
Her insurance company wanted the man to pay the difference. In the end, he had to pay $4500 out of pocket, I think. Some jurors were pushing for more because of future pain and suffering. It could have easily been $20,000 out of pocket.

I don't know how typical this is or what it means, if anything, when making a decision about coverage. All I know is the trial was almost 2 years after the accident and the man looked SO over it all. I felt kind of sorry for him.


Paul der Krake

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Re: Car insurance liability limits?
« Reply #12 on: November 16, 2012, 08:50:05 AM »
That is ridiculous. 5 weeks off work for broken wrists? I hope her surgery came with cocaine and male strippers. If this happened to me I'd be on the next plane out of the country, good luck getting any money. I'm all for justice but I'm not going to subsidize the circus that is healthcare and accidents lawyers in this country.

TheDude

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Re: Car insurance liability limits?
« Reply #13 on: November 16, 2012, 09:20:16 AM »
Why, do you think I'm getting ripped off? When I've heard anecdotes about what other people pay for car insurance, I've felt like I was getting a decent deal in comparison...

I dont think ripped of is the right word but I think you could do better.

I'm 31 married and own a house (so i get a discount on my premium). We have a 2005 dodge neon and a 1994 Saturn SL2. We have 250/500/100, un/under insurance bodily only, no med pay and comp/collision on the neon with 500 deductible.  Our premium is $299.

Also worth noting i am relentless when it comes to insurance price. I shop around once a year.

TLV

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Re: Car insurance liability limits?
« Reply #14 on: November 16, 2012, 10:03:01 AM »
Why, do you think I'm getting ripped off? When I've heard anecdotes about what other people pay for car insurance, I've felt like I was getting a decent deal in comparison...

I dont think ripped of is the right word but I think you could do better.

I'm 31 married and own a house (so i get a discount on my premium). We have a 2005 dodge neon and a 1994 Saturn SL2. We have 250/500/100, un/under insurance bodily only, no med pay and comp/collision on the neon with 500 deductible.  Our premium is $299.

Also worth noting i am relentless when it comes to insurance price. I shop around once a year.

I agree that the OP should shop around (at the least check geico.com and progressive.com) and not rely on a broker who earns a commission, but keep in mind that insurance premiums vary widely by location as well as company.

capital

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Re: Car insurance liability limits?
« Reply #15 on: November 16, 2012, 10:30:26 AM »
I had, I think, a $300k liability limit when I owned a car in California, but I lived in a neighborhood full of Bentleys and Ferraris. With that, plus comprehensive/collision with a $500 deductible on a $5000 car as a 24 year old, as well as un/underinsured motorist insurance (useful for bicyclists!) I paid $600 a year.

$80000 for breaking both wrists (and who knows what else!) seems plenty fair to me. Cars are dangerous and regularly do incredible amounts of damage to the human body.

DoubleDown

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Re: Car insurance liability limits?
« Reply #16 on: November 16, 2012, 11:16:48 AM »
If you were really worried, I guess you could look at an umbrella policy above and after your (already generous) auto insurance.


This is good advice if you have significant assets to protect. I recently got an umbrella policy with Geico that covers $1 million in liability above and beyond what the auto and home policies cover. It costs $120 per year, and covers any kind of liability, including claims on our primary residence and two rental homes (i.e., if your tenants sue you for whatever reason). Without the rental homes, it would have been $100/year. Yes, it's unlikely I'll need to use it and will kiss those ten employees goodbye each month, but I see it as a reasonably small price to pay for peace of mind and protecting the 'stache. That's what insurance is about, protecting against catastrophic loss.

ashem

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Re: Car insurance liability limits?
« Reply #17 on: November 16, 2012, 11:29:13 AM »
I forgot to mention she had to type all day in her line of work. What seemed odd to me was that her lawyer gave the jury her medical bills and lost wages to review, but his attorney never mentioned the possibility that health insurance and short term disability covered some of it. How much did she actually pay out of pocket? Doesn't that make a difference?

« Last Edit: November 16, 2012, 11:33:41 AM by Ashem »

Jack

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Re: Car insurance liability limits?
« Reply #18 on: November 16, 2012, 11:31:23 AM »
Uninsured/underinsured motorist coverage is pretty silly in my opinion. You're driving two beater cars and you're willing to waive collision insurance, meaning you can afford to pay for repairs/a new car. What difference does it make if someone else does it? I'm assuming you have health insurance as well, so you'd be able to afford the cost of care if you're in an accident. Paying extra every month for a consequence you can afford is just silly.

I had, I think, a $300k liability limit when I owned a car in California, but I lived in a neighborhood full of Bentleys and Ferraris. With that, plus comprehensive/collision with a $500 deductible on a $5000 car as a 24 year old, as well as un/underinsured motorist insurance (useful for bicyclists!) I paid $600 a year.

Could you guys expound on how un/underinsured motorist insurance is either "silly" or "useful for bicyclists?" After seeing the Geico quotes (below) I suddenly realize that it's a significant portion of the price. Please also consider that I bike to work 2 days/week and my wife bikes to work 5 days/week.

By the way, ehgee, I suspect that your insurance was lower because you only had 1 car and 1 driver, and I'm guessing that being surrounded by Bentleys and Ferraris probably lowered your rate, not raised it (because you were probably in a lower-crime and lower-uninsured-motorist area).

I agree that the OP should shop around (at the least check geico.com and progressive.com) and not rely on a broker who earns a commission, but keep in mind that insurance premiums vary widely by location as well as company.

My current insurance is with Progressive, so when I attempted to get a quote from there the website just told me to talk to my agent.

I just checked Geico, which quoted the following:

  • Geico apparently doesn't offer combined single limit policies, so there are no quotes equivalent to options 1, 2, or 3 from my initial post.
  • $323.10 per 6 months for coverage similar to option 4
  • $363.90 per 6 months for coverage similar to option 5
  • $432.10 per 6 months for coverage similar to option 6

Here's what happens if I remove uninsured motorist coverage (I don't have comparable Progressive quotes for these):
  • $194.00 per 6 months for 30/60/30 (bare minimum coverage)
  • $213.10 per 6 months for 50/100/100
  • $232.50 per 6 months for 100/300/100
  • $253.90 per 6 months for 250/500/100

I think I'm going to try to see if my broker will be willing to beat the Geico price...

capital

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Re: Car insurance liability limits?
« Reply #19 on: November 16, 2012, 12:12:13 PM »
Uninsured/underinsured motorist coverage is pretty silly in my opinion. You're driving two beater cars and you're willing to waive collision insurance, meaning you can afford to pay for repairs/a new car. What difference does it make if someone else does it? I'm assuming you have health insurance as well, so you'd be able to afford the cost of care if you're in an accident. Paying extra every month for a consequence you can afford is just silly.

I had, I think, a $300k liability limit when I owned a car in California, but I lived in a neighborhood full of Bentleys and Ferraris. With that, plus comprehensive/collision with a $500 deductible on a $5000 car as a 24 year old, as well as un/underinsured motorist insurance (useful for bicyclists!) I paid $600 a year.

Could you guys expound on how un/underinsured motorist insurance is either "silly" or "useful for bicyclists?" After seeing the Geico quotes (below) I suddenly realize that it's a significant portion of the price. Please also consider that I bike to work 2 days/week and my wife bikes to work 5 days/week.

By the way, ehgee, I suspect that your insurance was lower because you only had 1 car and 1 driver, and I'm guessing that being surrounded by Bentleys and Ferraris probably lowered your rate, not raised it (because you were probably in a lower-crime and lower-uninsured-motorist area).

I agree that the OP should shop around (at the least check geico.com and progressive.com) and not rely on a broker who earns a commission, but keep in mind that insurance premiums vary widely by location as well as company.

My current insurance is with Progressive, so when I attempted to get a quote from there the website just told me to talk to my agent.

I just checked Geico, which quoted the following:

  • Geico apparently doesn't offer combined single limit policies, so there are no quotes equivalent to options 1, 2, or 3 from my initial post.
  • $323.10 per 6 months for coverage similar to option 4
  • $363.90 per 6 months for coverage similar to option 5
  • $432.10 per 6 months for coverage similar to option 6

Here's what happens if I remove uninsured motorist coverage (I don't have comparable Progressive quotes for these):
  • $194.00 per 6 months for 30/60/30 (bare minimum coverage)
  • $213.10 per 6 months for 50/100/100
  • $232.50 per 6 months for 100/300/100
  • $253.90 per 6 months for 250/500/100

I think I'm going to try to see if my broker will be willing to beat the Geico price...
Geico was significantly more expensive than my insurer, Wawanesa, which only accepted people with clean driving records. Unfortunately, it's only available in California and Oregon. I also bike commuted, so I could insure my car as a pleasure vehicle as opposed to a commuter car, which cut my rates.

Here's a lawyer talking about why a cyclist wants uninsured motorist insurance:
http://www.bicyclelaw.com/p.cfm/legal-issues-for-cyclists/about-insurance
The worst drivers are the least likely to be insured, and you don't have a big steel cage protecting you from those idiots.
« Last Edit: November 16, 2012, 12:13:46 PM by ehgee »

grantmeaname

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Re: Car insurance liability limits?
« Reply #20 on: November 16, 2012, 12:15:01 PM »
Oh cool, I didn't know Bob Mionske had a blog! He has a counterpart down in Cincinnati that runs a good blog as well.

bogart

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Re: Car insurance liability limits?
« Reply #21 on: November 16, 2012, 01:31:53 PM »
That is ridiculous. 5 weeks off work for broken wrists?

I'm astounded this is even surprising.  I personally wouldn't be off work for that long due to broken wrists in my current desk job (breaking a single shoulder a few years back did cause me to miss probably at least 2 and affected my general productivity, including my ability to drive, far far longer), but I've certainly held jobs I couldn't have done with broken wrists.  Thinking e.g. just of the jobs my kids and their partners do, 2 of the 4 couldn't work if they couldn't weight-bear with their arms or lost mobility in their fingers (both work in medical fields with patients).

TheDude

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Re: Car insurance liability limits?
« Reply #22 on: November 16, 2012, 01:46:09 PM »
BTW I actually prefer a local agent.  My policy is through a local agent and she was the cheapest I could find from about 8 companies. When I buy from a local agent at least a little of the premium goes back into the community.

unpolloloco

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Re: Car insurance liability limits?
« Reply #23 on: November 16, 2012, 02:36:51 PM »
Keep in mind that lawyer costs can get pretty high in the event of a lawsuit and that there are situations where neither car is at fault, but one is deemed liable (for example, car #1 causes accident with car #2 and car #3, then drives off - driver 2 and 3 have to work it out) and situations where multiple cars and people are involved.  The chances are low of an accident taking more than 100k to resolve, but not impossible, especially with how sue-crazy people are.  All depends on the level of risk you're comfortable taking.  Young+high income = large pockets for the lawyers to go after.

Lazyretirementgirl

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Re: Car insurance liability limits?
« Reply #24 on: November 16, 2012, 06:44:35 PM »
Jack, here are my thoughts on your questions to me, and some points others have made. You have enough equity in your home that you want limits that can settle most lawsuits. With respect to my comment about a judgment, sorry to have been so cryptic. Ninety five percent of civil cases settle - no trial, no judgment, just a deal where money is paid and the defendant is released from liability. Most plaintiffs and their lawyers will take the insurance policy limits, if offered, because that is the quicker, easier money. Trying the case-- to get more money from an individual defendant --  involves expense for the lawyer, delay in getting money for the plaintiff and risk for both. So they usually take the policy limits if offered. The deKalb trial Ashem discusses is a situation where either the plaintiff or her lawyer was hellbent on getting more, and went to a great deal of trouble for very little benefit. There are people like that out there, although they are rare. Now, I am not familiar with this issue in Georgia, but in many jurisdictions, an insurer cannot pay your limits without getting a release for you -- meaning no further exposure for you. If, god forbid, you kill someone or leave someone gravely injured, you want limits available that are reasonable to protect your assets. 100/300 is likely okay, but look into the cost of an umbrella.
Finally, the uninsured motorists coverage is to protect you. If you are injured or killed in an accident by a motorist with no insurance, the UM responds. It will pay medical claims, lost wages, and loss of earning capacity, and pain and suffering. Whether you want it depends on whether you could absorb a loss of that type.
Hope this is a little more clear.

chucklesmcgee

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Re: Car insurance liability limits?
« Reply #25 on: November 16, 2012, 07:25:04 PM »

It's tough to determine appropriate liability limits, but I think you'll be fine with $100k. It's probably fair to have your coverage close to your net worth, because it's very easy to repossess a home and other assets. The median tort payout in Fulton County, GA over the last 10 years was just $7,000. Enormous vehicle accident tort payouts usually only occur when a corporation gets sued or if there's reason to believe the defendant was really behaving recklessly (like a drunk driver) or is really wealthy.

Good points all, thanks. By the way, where'd you come up with that "median tort payout in Fulton County, GA" figure?

I'm a law school student and have access to the nifty Westlaw database that lets me analyze all sorts of cases in mass and look at payout claims, success rate, etc. That was for vehicular negligence. I could break it down even further into vehicle-vehicle crashes, pedestrian accidents, wrongful death, etc. I think I did it for all claims since 2002, including those that were initiated in court but then settled. Those claims where a the initial complaint was never filed in court aren't included.

Is that cost per 6 months? Also why are you using a broker to get car insurance? I'd shop around a bit and also get a quote for option 3 minus uninsured motorist.
Why, do you think I'm getting ripped off? When I've heard anecdotes about what other people pay for car insurance, I've felt like I was getting a decent deal in comparison...

Ok yeah if it's for 6 months it's alright. A lot of that varies by state, etc. Still is probably worth shopping for.

Could you guys expound on how un/underinsured motorist insurance is either "silly" or "useful for bicyclists?"

With uninsured motorist collision insurance you're paying your insurance company to pay to repair your vehicles if someone else hits you and they don't have enough money to cover your damages. But you can afford to repair your cars and it's really unlikely anyone driving legally would have such a small policy they couldn't replace them.

For medical coverage of uninsured motorists, you already have health insurance. It depends on your financial situation and coverage, but I know I could definitely afford whatever surgeries, ER treatment, rehabilitation, etc I needed. Insurance companies definitely know your odds of being in a crash, the odds that the other person is liable, odds the other person is uninsured and expected cost of treatment way better than you do. It's a bet they win time and time again.

joseph100

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Re: Car insurance liability limits?
« Reply #26 on: December 04, 2012, 04:19:16 AM »
I currently have The Hartfords full coverage auto insurance. I have bundled my home and auto (2 cars) insurance and so Iíve gotten a discount thatís greatly reduced my premium rates. I really think you should shop around for rates. I decided on The Hartford after having shopped with at least 5 different companies. Do it yourself, if youíre worried about agent commissions! Nowadays most companies have auto insurance calculators on their websites.