Author Topic: Buy extra liability auto insurance  (Read 4919 times)

Avenger

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Buy extra liability auto insurance
« on: January 04, 2015, 06:55:34 PM »
Long time lurker, first time poster.

One thing I would encourage everyone who is trying to cut expenses and build net worth to do is not skimp on car insurance. I personally carry a 300k liability policy and then have a million dollar umbrella policy. Shop around to get the best price on the coverage, but then get a solid amount of coverage.

In many states you can drive with only a very minimal amount of liability coverage. Liability is the coverage that pays the occupants of another vehicle, or your passengers, in the event that you are responsible for an accident.

The problem is that ever if you are driving with a legal amount of coverage, if you are at fault for an accident with injuries\death exceeding that value you can become personally liable.

For most people that isn't a big deal, since they are broke (judgment proof). But if you have a net worth of hundreds of thousands or more you become a very attractive target to be sued and have your property\retirement\savings, etc., use to satisfy the liability.This is a real concern for those of us with paid off real estate & high account balances.

As an example, in one situation I am personally aware of a man retired at 60 years old used his savings to pay cash for a 600k house\land. He continued to drive with 25k minimum liability insurance. A year later he changed lanes into a motorcycle, causing over a million dollars in medical bills. The motorcycle driver hired a lawyer, who obtained a large judgment. The man then lost his house, and all savings\accounts over a $2,500 exemption.

Although I probably pay $1,500 more a year for the additional coverage + umbrella, I think that if you are at the point where you have a net worth of a couple hundred thousand or more, that a higher coverage level is necessary.

Also - get new quotes on insurance annually. It is very expensive to have friends in the insurance business.


AlexK

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Re: Buy extra liability auto insurance
« Reply #1 on: January 04, 2015, 07:33:28 PM »
I hear what you are saying but $1500/year would add 10% to my total expenses. The probability of such a catastrophic lawsuit happening is very low (that's how insurance companies make a profit).

I currently have only the minimum liability insurance and no homeowners insurance on my residence (I do have it on the rentals).

It seems like having a way to make it difficult for a lawyer to find out the extend of your assets would go a long way toward solving the huge liability lawsuit problem. If the lawyer can't see any assets they won't waste their time in court. Put properties into a trust? Can a lawyer find out the balance of my stock accounts? I don't know, but I bet someone here does.

ClaycordJCA

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Re: Buy extra liability auto insurance
« Reply #2 on: January 04, 2015, 08:30:37 PM »
Once a judgment is entered, in California and I venture all other states, the Plaintiff's lawyer is able to conduct a judgment debtor's examination under oath in which the debtor is obligated to produce all financial records and testify regarding assets and liabilities. So, it actually is very easy to find assets.  I agree that having sufficient insurance is vital to protect the satche - unless you can self-insure. We know a family that opted to forego homeowner's insurance - after all, what could happen?  Just a wildfire. They lost everything.

HoneyBadger

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Re: Buy extra liability auto insurance
« Reply #3 on: January 04, 2015, 09:46:30 PM »
I agree with Avenger.  My approach to controlling the total cost of insurance is to carry high-deductible policies.  I can afford a $2,500 loss; a $2 million loss, not so much.  In my mind, saying that you won't be negligent and don't need liability coverage is the same as saying you're young and don't need health insurance.  No one can be certain "it won't happen to them."  A friend of mine struck and killed a motorcyclist that had been knocked into the road right in front of him by another vehicle.  There was no way he could have avoided the accident.  Even though he wasn't negligent, the driver that caused the accident was judgment proof,  so the survivors sued my friend.  His insurance company settled, but if he had had minimum coverage he probably would have lost everything.

ClaycordJCA

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Re: Buy extra liability auto insurance
« Reply #4 on: January 04, 2015, 11:17:10 PM »
Cathy obviously does not have teenage drivers. I do. Two. I'll pay for the insurance.

Dicey

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Re: Buy extra liability auto insurance
« Reply #5 on: January 04, 2015, 11:37:35 PM »
As I said, there is a big difference between random events you do not control (like getting sick) and events you fully control (like negligent driving).

I would go further and say if you [are] not confident in your ability to avoid negligent driving, you shouldn't be operating a motor vehicle.
Cathy, I averaged well over 25k/ miles per year in my career as an outside sales rep. I am an excellent driver. I have never caused an accident. I have only experienced a couple of very minor accidents which were 100% not my fault. That said, I recognize that I am human, and could make an error in judgement the very next time I get behind the wheel. As long as there are other drivers on the road, 100% control is a pink-and-purple unicorn. That's why I carry plenty of well-priced insurance. That's what it's for.

And getting sick is not completely random, either.

electriceagle

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Re: Buy extra liability auto insurance
« Reply #6 on: January 05, 2015, 03:56:30 AM »
I agree with Avenger.  My approach to controlling the total cost of insurance is to carry high-deductible policies.  I can afford a $2,500 loss; a $2 million loss, not so much.  In my mind, saying that you won't be negligent and don't need liability coverage is the same as saying you're young and don't need health insurance.  No one can be certain "it won't happen to them."  A friend of mine struck and killed a motorcyclist that had been knocked into the road right in front of him by another vehicle.  There was no way he could have avoided the accident.  Even though he wasn't negligent, the driver that caused the accident was judgment proof,  so the survivors sued my friend.  His insurance company settled, but if he had had minimum coverage he probably would have lost everything.

As I said, there is a big difference between random events you do not control (like getting sick) and events you fully control (like negligent driving).

If you were not negligent, other drivers are not going to be able to recover damages from you. If your friend was not negligent, he would have won the lawsuit and even minimum coverage would have covered the litigation costs.

The courts aren't always right. Sometimes they find the wrong driver to be negligent. Sometimes a jury just doesn't want to let some poor, injured guy go home empty handed.

Just as important, you have to pay for your own legal bills once they exceed your coverage.

That said, extra liability insurance shouldn't cost $1500 unless you have a very bad risk history. The market rate should be around ~$50/yr to bring an auto policy to 300k or so and $150/yr for a $1MM umbrella that covers home and auto.

With that kind of money on the line, the insurer will provide top-flight lawyers and you won't have been negligent in the first place!

JLee

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Re: Buy extra liability auto insurance
« Reply #7 on: January 05, 2015, 08:04:35 AM »
I agree with Avenger.  My approach to controlling the total cost of insurance is to carry high-deductible policies.  I can afford a $2,500 loss; a $2 million loss, not so much.  In my mind, saying that you won't be negligent and don't need liability coverage is the same as saying you're young and don't need health insurance.  No one can be certain "it won't happen to them."  A friend of mine struck and killed a motorcyclist that had been knocked into the road right in front of him by another vehicle.  There was no way he could have avoided the accident.  Even though he wasn't negligent, the driver that caused the accident was judgment proof,  so the survivors sued my friend.  His insurance company settled, but if he had had minimum coverage he probably would have lost everything.

As I said, there is a big difference between random events you do not control (like getting sick) and events you fully control (like negligent driving).

If you were not negligent, other drivers are not going to be able to recover damages from you. If your friend was not negligent, he would have won the lawsuit and even minimum coverage would have covered the litigation costs.

Now personally I control this risk by never driving a car. But the risk of being negligent is not the same thing as the risk of random events like getting sick or your house burning down. It is very different.

I would go further and say if you not confident in your ability to avoid negligent driving, you shouldn't be operating a motor vehicle. Drivers like that are part of why I am afraid of vehicles.
You appear to think we live in a black and white world.

FYI: We don't.

GetItRight

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Re: Buy extra liability auto insurance
« Reply #8 on: January 05, 2015, 08:57:19 AM »
There is a nontrivial difference between house insurance and driver's liability insurance.

House insurance is mostly to guard against random events over which you have no control, but would be very bad if they occurred.

On the other hand, driver liability insurance is insuring you against the chance that you are negligent. You can avoid the necessity of such insurance by not being negligent in your driving. I would not pay $1,500 per year to insure against the risk that I might be negligent. I'd rather just not be negligent in the first place. (Also, I've never driven a car and don't plan to, but the principle applies more broadly.)

Exactly. If you drive negligently or carelessly then you should probably pay for more coverage if you refuse to drive safely, but if you ensure you do not cause accidents your risk is very low. It's not difficult to not cause accidents, and modest liability insurance will cover any likely BS legal judgements against you if you are in fact a victim of an accident someone else caused. Yes it does happen where the victim in charged and fined by the government and loses some judgement to an insurance company or individual in court. If you haven't say, caused an accident involving a motorcyclist and otherwise drive safely and attentively you have a very low risk of causing a high dollar amount of damage to persons or property.

Personally I have only minimum liability required by law. I used to carry significantly more but reduced it when adding a second vehicle since they charged me nearly double yet I am still only driving one vehicle at a time. Automotive insurance is a scam, they can essentially charge whatever they want and institute nonsensical policies such as only insuring vehicles for liability and not drivers (suggesting the vehicle will drive itself and cause harm to persons or property) since they are in cahoots with the government. While I have been in several accidents I have not caused one and thus have never had a claim against my insurance.

If you have significant assets and are concerned you may cause some horrible injury/death/damage you have to weigh the risk vs a higher monthly insurance cost or a large payout if self insuring with your investments.

JLee

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Re: Buy extra liability auto insurance
« Reply #9 on: January 05, 2015, 09:13:53 AM »
There is a nontrivial difference between house insurance and driver's liability insurance.

House insurance is mostly to guard against random events over which you have no control, but would be very bad if they occurred.

On the other hand, driver liability insurance is insuring you against the chance that you are negligent. You can avoid the necessity of such insurance by not being negligent in your driving. I would not pay $1,500 per year to insure against the risk that I might be negligent. I'd rather just not be negligent in the first place. (Also, I've never driven a car and don't plan to, but the principle applies more broadly.)

Exactly. If you drive negligently or carelessly then you should probably pay for more coverage if you refuse to drive safely, but if you ensure you do not cause accidents your risk is very low. It's not difficult to not cause accidents, and modest liability insurance will cover any likely BS legal judgements against you if you are in fact a victim of an accident someone else caused. Yes it does happen where the victim in charged and fined by the government and loses some judgement to an insurance company or individual in court. If you haven't say, caused an accident involving a motorcyclist and otherwise drive safely and attentively you have a very low risk of causing a high dollar amount of damage to persons or property.

Personally I have only minimum liability required by law. I used to carry significantly more but reduced it when adding a second vehicle since they charged me nearly double yet I am still only driving one vehicle at a time. Automotive insurance is a scam, they can essentially charge whatever they want and institute nonsensical policies such as only insuring vehicles for liability and not drivers (suggesting the vehicle will drive itself and cause harm to persons or property) since they are in cahoots with the government. While I have been in several accidents I have not caused one and thus have never had a claim against my insurance.

If you have significant assets and are concerned you may cause some horrible injury/death/damage you have to weigh the risk vs a higher monthly insurance cost or a large payout if self insuring with your investments.

Minimum liability in Arizona won't completely cover you if you total a relatively cheap car. It's scarily low. Compare this to Canadian requirements:

Quote
Arizona requires drivers to have car insurance that meets or exceeds the following minimum levels: Bodily Injury Liability Coverage: Minimum $15,000 per person / $30,000 per accident. Property Damage Liability Coverage: Minimum $10,000.
Quote
In Alberta, the minimum requirement for insurance is $200,000 Third Party Liability and Accident Benefits. (The majority, over 98% of vehicles are insured for at least a $1,000,000 limit of third party liability.)

I carry uninsured and underinsured motorist coverage - if I got hit hard by someone else carrying minimum coverage, they wouldn't cover me.  Keep in mind you don't have to worry about just yourself, but also everyone else on the road. We have a lot of uninsured people in Arizona as well.
« Last Edit: January 05, 2015, 09:17:12 AM by JLee »

SugarMountain

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Re: Buy extra liability auto insurance
« Reply #10 on: January 05, 2015, 10:10:52 AM »

That said, extra liability insurance shouldn't cost $1500 unless you have a very bad risk history. The market rate should be around ~$50/yr to bring an auto policy to 300k or so and $150/yr for a $1MM umbrella that covers home and auto.


This.  I have a $1MM umbrella with State Farm that is right around $150/year.  I don't think we pay $1500/year for 3 auto policies, two of them full coverage.

GetItRight

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Re: Buy extra liability auto insurance
« Reply #11 on: January 05, 2015, 10:38:16 AM »

Minimum liability in Arizona won't completely cover you if you total a relatively cheap car. It's scarily low. Compare this to Canadian requirements:

Quote
Arizona requires drivers to have car insurance that meets or exceeds the following minimum levels: Bodily Injury Liability Coverage: Minimum $15,000 per person / $30,000 per accident. Property Damage Liability Coverage: Minimum $10,000.
Quote
In Alberta, the minimum requirement for insurance is $200,000 Third Party Liability and Accident Benefits. (The majority, over 98% of vehicles are insured for at least a $1,000,000 limit of third party liability.)

I take personal responsibility to drive in such a way that I do not cause $15,000 of injury to a person and $10,000 of damage to their property. If for some bizarre reason I cause that damage, I am ethically bound to pay to make that person whole again and will do so to the best of my ability.

I carry uninsured and underinsured motorist coverage - if I got hit hard by someone else carrying minimum coverage, they wouldn't cover me.  Keep in mind you don't have to worry about just yourself, but also everyone else on the road. We have a lot of uninsured people in Arizona as well.

I do have health insurance and am aware that if I'm hurt bad enough to actually use it I'll likely need to pay the out of pocket maximum. My understanding is if I seek medical coverage for a covered type of injury or illness they will pay as per the policy, regardless of how or why it happened. My health insurance company can take the person who harmed me to court and recover what they can from that individual and/or their insurance company.

If my property is damaged I will deal directly with their insurance company filing a claim and if they don't pay to make me whole I will file a lawsuit against the insurance company and the individual for damages to my property.
« Last Edit: January 05, 2015, 12:21:40 PM by GetItRight »

gimp

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Re: Buy extra liability auto insurance
« Reply #12 on: January 05, 2015, 11:50:20 AM »
I drive next to $250k+ supercars weekly, and $100k+ luxury many times a day. Some supercars park at work. You bet your butt I have the maximum liability, including property. Highly recommended where I live.

Other places, I might not bother with the property one (medical yes). Still, going from $250k to $500k is, like, ten bucks for six months.

Blonde Lawyer

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Re: Buy extra liability auto insurance
« Reply #13 on: January 05, 2015, 01:49:31 PM »
Don't forget to keep in mind that in many states your under/uninsured liability insurance can't be higher than your liability insurance.  If you want to be able to collect if someone injures you then insure yourself appropriately.  It is not just about the exact dollar amount of your medicals.  There are lost wages to consider, pain and suffering, loss of enjoyment of life, loss of future earning capacity, etc.  Until I amass Mustachian levels of assets, I plan on having at least a $250k policy to protect me from the people without insurance.