When someone acts negligently and harms you or damages your property, they must pay for your losses. In many cases, the dollar amount of the losses that victims suffer is much more than the responsible party can pay. However, many have insurance to help them cover what they owe.
This type of insurance is called liability insurance, and it helps responsible parties pay the money they owe. Sometimes it’s hard to know how much liability insurance you should have.
If you have been injured and seek compensation, your personal injury attorney will begin your quest for compensation by determining the type and extent of insurance the responsible party carries.
Read on to find out about the various kinds of liability insurance available, what it protects, and how to know when you have enough coverage in case of an accident.
Types of Liability Insurance
Individuals and businesses can purchase various types of liability insurance to help provide funds if they are found liable for an accident. In some instances, the law requires insurance, as in the case of motor vehicles. However, sometimes, obtaining insurance is at the sole discretion of an individual.
Although policy premiums can be expensive, paying for accident damages will likely cost much more than the total of a policy’s premium payments over time. As such, individuals are encouraged to obtain insurance whenever possible.
Motor Vehicle Liability Insurance
Motor vehicle insurance is perhaps the most purchased type of liability policy. In California and most other states, automobile liability insurance is mandatory. Drivers must purchase and maintain minimum coverage just in case they are at fault for an accident.
How does liability insurance protect you? In the Golden State, motorists must carry at least 15/30/5 coverage, which is $15,000 for accidents resulting in bodily injury or death, with a minimum of $30,000 for a single accident plus $5,000 for property damage.
Although many motor vehicle accidents yield injuries with damages less than these policy limits, there are those crashes that cause catastrophic injuries that inflict many years of losses and much higher damage figures on victims and their families.
When a person causes injuries beyond their policy limits, they are on the hook for the unpaid damages that remain. If this is the case, the personal injury lawyer handling the claim will work to find other sources to recover payment, such as the negligent driver’s assets.
Motor vehicle liability insurance covers many of the direct costs associated with car accidents, including:
- Ambulance costs
- Emergency room bills
- X-rays, PET scans, and other similar tests
- Hospital and doctor’s bills
- Short- and long-term care
- Physical therapy
- Prescription medicine
- Funeral and burial costs when death occurs
The list above is not exhaustive. When your personal injury lawyer is calculating compensation, they may be able to include other direct economic expenses as well, depending on the situation of the accident.
There are also non-economic damages that may also be available for injury victims or their families, including:
- Physical pain and suffering
- Emotional distress
- Loss of enjoyment of life
- Body or facial disfigurement
- Loss of consortium or companionship
Although these damages don’t have a price tag, insurance companies and your personal injury lawyer have methods of assigning them a dollar value, and you deserve compensation for them.
Car liability insurance does not cover every injury and loss associated with a car accident. In addition to policy limits, there are exclusions as well. For starters, the policy will not cover any damages that exceed its limits.
Some drivers opt for higher insurance coverage to protect their personal finances and assets. Also, if the policyholder intentionally causes damage instead of negligently, there is no coverage.
Additionally, liability insurance will not cover any property damage you suffer. Motorists interested in having property damage protection need to buy either collision or comprehensive insurance along with their liability coverage.
On a related note, California penalizes uninsured motorists by barring them from seeking non-economic damages, such as pain and suffering. Hence, an injured motorist’s potentially significant claim for compensation could diminish in value.
How Much Liability Insurance Should I Have?
Drivers who spend a fair amount of time on the road should buy as much insurance protection as possible. The minimums are a good starting point but may be severely lacking in some accident situations.
Suppose you have acquired many valuable assets, such as stocks, jewelry, cash, and properties. In that case, the extra cost of raising your coverage limits may be worth the protection it will give you against the high costs of a serious accident you cause.
Coverage limits of more comprehensive policies may be:
- 50/100/50, which is appropriate for low-resource individuals on a budget
- 100/300/100, which can serve middle-income earners well
- 250/500/100, which suits higher-net-worth individuals
In some cases, drivers may find it appropriate to acquire even more coverage, such as with an umbrella policy that kicks in when you exceed your policy limits. Some of these policies may offer over $1 million in coverage.
Personal Liability Coverage
What does a personal liability policy cover? Personal liability coverage protects your net worth and assets, including future worth and earnings. It comes with other policies, including homeowners insurance.
Although a good idea for anyone who can afford it, personal liability coverage is best suited for individuals with high-dollar assets and net worth. An individual or business can protect its assets with a personal liability policy worth hundreds of thousands of dollars.
How Personal Liability Coverage Works
Personal liability coverage may come with a homeowners insurance policy.
Let’s assume you have $250,000 in coverage and someone is injured at your residence. The injured individual could file a claim with your insurance company if you were at fault.
Now let’s assume the total damages suffered by the injured person reach $500,000. What will happen is the injured individual’s personal injury attorney will pursue the difference through a lawsuit against you and your assets.
How Much Personal Liability Insurance Coverage Should I Have?
Many financial advisors and planners recommend individuals purchase at least between $300,000 and $500,000 of personal liability insurance coverage.
Others advise individuals to have at least enough insurance to cover the total of all their financial assets, including:
- Retirement funds
For those with additional potential risks associated with their property or work, such as the presence of a swimming pool or trampoline, insurance experts recommend maxing out their homeowners’ policies, which usually have a limit of $500,000.
You can purchase more insurance if you already have the maximum coverage offered by your homeowner’s policy. Umbrella policies provide extra coverage when you reach your policy limits.
Generally speaking, these policies come in increments of $1 million, with some providers offering limits as high as $10 million. If you have a high net worth of over $500,000, the extra cost of an umbrella policy is likely worth it.
The costs of umbrella policies are typically much lower than one would expect. For example, a few hundred dollars annually gets you a base coverage (around $1 million). At less than $30 a month, it is a small price to pay for such extensive coverage.
The truth is, umbrella policies cost so little because they provide supplementary coverage and don’t kick in until the principal policy’s coverage has been exhausted. This doesn’t always happen since many injuries generate damages well below policy limits.
Insurance companies can afford to back these policies that aren’t used nearly as much as their higher-cost products.
General Liability Coverage
Business owners owe a well-defined duty of care to their customers. They must pay for the negligent actions of their employees and the damages caused by failing to maintain a safe place of business.
How General Liability Coverage Protects Businesses
When an individual becomes injured at someone’s place of business, their personal injury lawyer will immediately begin searching for sources of compensation. Without insurance, the proprietor may be held responsible for substantial damages.
Imagine a customer who falls and experiences a traumatic brain injury (TBI) or another catastrophic injury while visiting a store. They could potentially have thousands or even millions of dollars in damages.
A general liability insurance policy would cover many—if not all—of these damages. However, the store could be on the hook without coverage.
Recommended Levels of General Liability Insurance
Every business is different, but all will benefit from having some general liability insurance. Experts in the industry recommend small companies in California purchase at least $500,000 to $1 million in general liability insurance.
Customers injured in places of business or by an employee’s negligence may pursue significant monetary damages. An owner can lose their business and all of its assets without insurance.
Liability Coverage and Absence of Fault
If you are in a car accident but bear no fault for the crash, you can file a claim against the at-fault driver’s insurance company. You can also seek to have your insurance company pay for the damages. Whichever route you choose, there are some important considerations to keep in mind.
First, you will have to pay a deductible. For some, the deductible may be a considerable outlay of cash.
However, suppose that you were not at fault for the accident. In that case, your insurance company will eventually make a subrogation demand against the at-fault driver’s insurance company for the compensation it paid you, including your deductible. Once your insurance company receives its reimbursement, it will return your deductible.
Second, there’s the aspect of time. If you file your claim with your insurance company, you will likely see a compensation payout much quicker than if you file with the other driver’s insurance.
For homeowners’ policies, negligence of the policyholder or their family is a strict requirement. Without any fault, the liability coverage does not apply.
Other Types of Liability Insurance Coverage
Various types of liability insurance exist. However, not all provide coverage for personal injury claims. For example, you can not use multiple forms of professional liability insurance to pay bodily injury or property damage claims.
Types of liability insurance related to personal injury include medical professional, product, and special event liability insurance.
Injured patients have a secure source of compensation with medical professional liability insurance or malpractice insurance.
Although medical malpractice insurance is not a requirement in California, most hospitals and health groups require their physicians to carry at least $1 million of coverage per incident with a maximum of $3 million per year.
Insurance Companies and Liability Compensation
Claimants seeking a fair payout for their injuries should know that the compensation process is usually not claimant friendly.
The primary objective of insurance adjusters is to save their companies money. They often accomplish this by reducing or denying legitimate claims, which is easier for them when a claimant does not have a personal injury attorney representing them.
If someone injures you, speak with a personal injury attorney before talking with an insurance adjuster. They will pursue maximum compensation for you.
Your personal injury lawyer will fiercely negotiate for a payout that does justice to your losses. Whereas an insurance adjuster doing their job may try to convince you to settle for less or even attempt to get you to admit blame where you had none.
Call a Personal Injury Lawyer for Help
For many, insurance details are tedious and complicated. If you need help understanding provisions, coverage, or anything else insurance related, contact a trusted personal injury attorney for the clarification you need.