Finding The Perfect Liability Coverage Amount For Your Needs

  • John A. Osborne
  • May 14, 2023
Small Business Insurance New Hampshire

Liability insurance is a must-have for anyone who owns a car, a home, or a business. It covers you in case someone gets injured or their property gets damaged as a result of your actions, and it can save you from financial ruin if you’re sued. But how much liability coverage do you really need? Is it better to go for the minimum required by the law or to get more? In this article, we’ll explore the different factors you should consider when choosing the best liability coverage amount for your situation.

First, let’s define some terms. Liability coverage is usually expressed in two numbers, such as 50/100, 100/300, or 250/500. The first number represents the maximum amount of bodily injury coverage per person in an accident, while the second number represents the maximum amount of bodily injury coverage per accident. For example, if you have 100/300 coverage and you cause an accident that injures three people, each with medical bills totaling $50,000, your insurance would pay up to $100,000 for each person (up to a total of $300,000), but anything above that would be your responsibility.

Your Assets and Income

One of the main factors to consider when choosing your liability coverage amount is your financial situation. If you have a lot of assets and a high income, you should consider getting higher limits than the minimum required by the law. Why? Because if you cause a serious accident that results in a lawsuit, the other party’s lawyers will go after your assets and income to cover their client’s damages, and the court could order you to pay more than your insurance covers. In that case, you could lose your savings, investments, home, and future earnings.

On the other hand, if you have few assets and a low income, you may be able to get away with lower limits, especially if you have a good health insurance policy that covers your own medical bills in case of an accident. However, keep in mind that accidents can happen to anyone, and even if you don’t have much to lose now, you could still be liable for damages that exceed your coverage.

Your Risk Profile

Another factor to consider is your risk profile. If you’re a cautious driver who rarely takes risks, you may not need as much coverage as someone who drives aggressively or in hazardous conditions. Similarly, if you own a business that involves physical activities or interactions with customers, you may need higher coverage than a business that operates online or in a low-risk industry.

To assess your risk profile, think about the following questions:

  • How often do you drive?
  • Where do you usually drive?
  • Do you have a history of accidents or traffic violations?
  • Do you carry passengers often?
  • Do you own a pool, a dog, or other potential hazards?
  • What type of business do you own, and what are the risks associated with it?

Your Peace of Mind

Finally, you should also consider your peace of mind when choosing your liability coverage amount. How much are you willing to pay for the security of knowing that you’re protected in case of an accident? If the thought of being sued and losing everything keeps you up at night, you may want to opt for higher limits, even if it means paying more in premiums. Conversely, if you’re confident in your driving skills and your ability to manage risks, you may be comfortable with lower limits.

In conclusion, there is no one-size-fits-all answer to the question of what is the best liability coverage amount. It depends on your financial situation, your risk profile, and your personal preferences. However, by considering these factors and consulting with a knowledgeable insurance agent, you can find the right balance between protection and affordability.

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