When buying car insurance, consider other assets you own

One of our younger agents came to me the other day to ask advice on how to approach a customer he personally knew. That customer has a current auto insurance policy with minimum bodily injury liability limits as required by the state of $25,000 per person and $50,000 per occurrence. He took out the policy through a direct writer over the phone and was happy he was able to save a lot of money from his prior insurance company.

The problem is that this agent had done due diligence and knew this customer’s home had a replacement value of more than $400,000. His equity in the home is probably well over $100,000.

I advised him to quote the customer bodily injury liability limits of at least $100,000 per person and $300,000 per occurrence and have a conversation with him about asset protection. This customer also has a couple of young drivers under the age of 21.

When you call a company directly that primarily writes auto insurance, or go on line to get a quote for auto insurance, you really need to know what you are doing. Why?

Bodily injury liability and property damage liability protect you in the event of a negligent accident. Those coverages pay for the injuries and pain and suffering the other party may incur as the result of your negligence, as well as repairing that person's vehicle.

The state minimum coverage in Georgia as noted above is $25,000 per person and $50,000 per occurrence under bodily injury and $25,000 under property damage coverage. The company you get a quote from may sell you an auto insurance policy without regard to your home ownership or other assets. Typically, it may be a referral or a redirect on line after the auto sale is completed. So, why is this important?

If you are involved in an accident and are at fault, resulting in injuries over the state minimum, your insurance company will defend you up to the limits of the policy. If the injuries suffered by the other party exceed your policy, they will write a check for the limits of your policy and close the claim. What happens to the rest of the compensation for the injured party?

You may be personally liable if there is a judgment against you that exceeds the insurance policy limits. How injured does someone have to be to run up a bill over $25,000? Or what if there are four or five occupants of the other vehicle and they each have significant injuries?

Yes, the minimum liability limits cost you less than higher limits. With young drivers, that cost can be significant. But why would you risk losing your home and other attachable liquid assets just to save a few dollars. The choice is always yours.

Know what you are buying!

This story was originally published December 13, 2017 at 1:10 PM with the headline "When buying car insurance, consider other assets you own."