When analyzing an auto insurance policy written in the state of Michigan, liability limits are often an overlooked line on the declarations pages. In most cases licensed agents do not take the proper amount of time to explain the importance of this coverage to their clients. With the higher premium payments in the state of Michigan, some agents will lower the liability limits to reduce the policy quote amount in order to gain new business from a client.
Let’s first start out with a basic breakdown of liability coverage on an auto insurance policy 📄 👇
In the state of Michigan, liability coverage on auto insurance is categorized in to ‘split limits’ coverage amounts. The format of the coverage as it appears on the declarations pages is as follows number/number/number.
For example, the coverage option 500/500/100 provides liability insurance up to $500,000 per person and $500,000 per accident for bodily injury. The last coverage provides $100,000 worth of property damage coverage.
Bodily Injury Liability
*Per Person/Per Accident
Industry standard liability limits have been 100/300/50 for the last decade, yet this is an arbitrary split limit amount because each policy requires different coverage amounts based on an individual’s or family’s assets. A number of policy shoppers will ask their agent to quote this coverage to the minimum state required coverage, without calculating their assets and assigning proper liability limits. Lowering your liability coverage is not worth saving $10/year. There are other ways to save money on auto insurance, which I explore in detail on my blog page.
Before calculating one’s assets to ensure the liability limits are quoted appropriately, it is important to understand why it is a responsible choice to carry this coverage beyond the minimum state requirements. In the event of an incident where the other party sustains bodily injury, the individual at fault may be subject to medical bills and lost wages based on the result of the legal proceedings. A phrase I heard once during my brief stint at Allstate was “think of yourself driving around with all of your belongings in the trunk”.
This statement implies that when a driver is on the road the potential for risk increases with each driver carrying their assets in the trunk, with the possibility of being on the hook for compensation. By carrying the appropriate liability limits the insured party can have peace of mind knowing that their assets are protected in the event of causing bodily injury.
How much liability coverage do I need?
Calculating your assets to determine the amount of coverage is the first step in understanding your insurance liability limits. Make sure to speak with your agent about this coverage. It is always best to carry a minimum of 500/500 in coverage seeing as the average court settlement is close to 1 million dollars in the state of Michigan.
In summary liability coverage on an auto insurance policy is a small percentage of what you are paying in premium to insure a vehicle. Regardless of the premium, it is important to carry the appropriate amounts and take the reality in to situations. Your agent should know the statistics with your coverage needs in your area code.
Drive safe Michigan,