Suppose you are traveling home on I-81 from Kingsport to Johnson City and you hit someone. Sadly, the driver is injured and the vehicle damaged. The vehicle, a brand-new Ford truck valued at over $50,000, is totaled, and the driver needs to be admitted to the hospital for head trauma. The driver is out of work for months and needs extensive testing and procedures to restore his health. You realize you are in for a massive lawsuit. In a tragic situation like this, would you be properly covered by your auto insurance policy or are your policy limits too low? As awful as it is to think about, auto accidents happen and you need to be prepared.
Sometimes, in the cases of extremely costly claims, your insurance provider (for example, Erie, Progressive, etc.) may just write you a check for the full amount of your limits and walk away, never providing you with an attorney for your defense. While this situation is rare, how would you protect yourself and your family if it were to happen to you? Do you have the proper limits on your auto insurance policy?
When Attorney Costs Aren't Covered by Your Auto Policy
In most standard auto policies, there is a phrase such as, “Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted by payment of judgements or settlements.” This means that after they have paid the full amounts of your limits, they are no longer required to provide you defense in the case of the lawsuit. If they decide just to pay you the entirety of your limits outright, they are never obliged to defend you.
So in the above example, what if your insurance company were to just give you the $40,000 they owe for the vehicle and the driver, and leave you to hire your own attorney for the entirety of the lawsuit? Insurance companies generally will not do this, but if you are in a million dollar lawsuit with very low limits on your policy, this option is usually in their best interest and in the best interest of their shareholders.
What Your Auto Insurance Limits Should Be
There are several things you should do to defend yourself against this type of situation. First, make sure you have proper limits on your auto insurance policy. At Veritas, we recommend a bare minimum of 100/300 bodily injury coverage, though we prefer to see our clients choose limits of 250/500. While some people have 50/100 limits, the average emergency visit if someone is admitted is $57,000. That means a 50/100 limit may not cover your costs. Second, make sure you are properly protected with a personal umbrella policy which provides additional coverage of $1-5 million. This policy would extend the limit of liability, providing you coverage well beyond your limits and defense by the insurance companies’ attorneys.
It’s important to sit down with your insurance agent and discuss whether you have proper coverage in the event of an accident. Nobody wants to think about these types of situations, but it’s better to be prepared than to lack coverage if something happened.
Auto Insurance Questions?
If you have any questions about your auto insurance policy or would like a free auto insurance quote, feel free to contact our Tennessee office at (423) 292-4142, or send an email to help@veritasrm.com. Veritas is an independent insurance agency, meaning we work with a number of different companies and will help you find the best and most affordable policy for your needs. Our personable and knowledgeable staff would be happy to help you with any of your questions.
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