We all know that shopping for auto insurance is tough. Especially when they make it so hard to understand. Well, today I’m going to show you what are the things to look for when you’re buying an auto insurance including bodily injury liability.
When choosing auto insurance, there are three things you need to consider. You can see the attached photo above for your reference. First, is the coverage, second is your limit. Lastly, your deductible. The coverage section is all about the protection you can get in the event of an accident or emergency. The second are the limits and that’s how much the company will pay out based on what happens. The third is the deductible, which shows how much you will be responsible for when your vehicle is damaged or there’s an emergency.
In this article, we’re gonna talk about “Bodily Injury Coverage”. So, Bodily Injury Liability or Coverage will protect you as the policyholder. It’s going to cover any expenses related to people that you harm. In other words, if you ever caused an accident that results in bodily injury to a pedestrian or another driver. This coverage will help you pay for their medical expenses. Also in any lost wages that they incur because of the accident.
Bodily Injury Liability is usually a part of mandatory minimum legal insurance in some states. Take note that every state has different rules. In terms of how much bodily injury coverage you need.
How Does Bodily Injury Liability Work ?
Well, we all knew that humans can’t regenerate after an injury, unlike starfish. So, when you cause an injury or death to another person in a car accident. Bodily injury coverage can cover the associated costs up to the max limit of your liability. Take note that this includes legal fees, if this whole fiasco leads to a lawsuit. When you look at your policy, you can see there is a “per person” amount. It means that it’s the max cover per person. On the other hand, the “per occurrence” amount. It means that it is the max cover for the accident. This includes multiple injured people.
A minimum required coverage varies by state. But of course medical bills that include multiple people, aren’t cheap. So a little bit of advice, try getting above your minimum state requirement. Because sooner or later it’ll be worth it.
Let’s say it this way. If you’re at-fault in an accident you might worry about the costs of car repairs. But when you try to look at the bigger picture. You’ll see that their medical bills could be more expensive. Having said that, you might have to pay for those too. That’s the reason why most auto insurance policies include bodily injury coverage.
Bodily injury liability can help pay for medical bills, lost wages, compensation for pain and suffering and even legal fees. However, it does not cover the cost of vehicle repairs. That’s the reason why you need other coverages. Coverages like collision coverage and property damage coverage.
Consider Lyria, she’s usually a safe driver, but today he rear-ended another car.
The accident is her fault. The other driver and her passenger were both injured in the said incident. After the ambulance rides, labs and medical tests, plus treatments for their injuries. Their medical bills alone could be in the thousands or even millions. Because Lyria’s at-fault in this scenario. She could be responsible for paying all those bills and expenses. Worse, the other driver could even sue her.
Thankfully she has bodily injury liability on her policy. This coverage helps her cover the injuries for the other driver and her passenger. It even helps pay for Lyria’s legal defense if the other driver decides to file a lawsuit against her. Instead of emptying her savings, Lyria’s insurance kicks in to cover the costs. Even though the accident was her fault in the first place.
Let’s have an example to show you how bodily injury liability works.
Let’s say that you have the legal minimum insurance in your state. Say that the minimum insurance in your state is 50/100/25. But what does this mean? Well, it’s a split limit. There’s a separate article about it. You can check “split limit coverage” for a better understanding. Today let’s focus on the first 2 numbers. Because these first 2 numbers pertain to bodily injury coverage. The first number which is 50, means that your policy will cover up to $50,000 in damages “per person”. We’re gonna tackle this more later in our example.
Now, on the other hand. The 2nd number, which is 100 is per incident or per occurrence. It’s confusing sometimes. Let’s have an example to make it a little easier. So let’s say that in our example, you harm 3 different people. Ronny, Jeyz and Lyria. Their medical expenses are the following:
Ronny = $50,000, Jeyz = $65,000, Lyria = $10,000
Now let’s figure out what your insurance policy is going to pay out. Let’s go back to our 50/100/25 split limit. So, in terms of “per person” it will pay out no more than $50,000.
So, now let’s take a look at the damages stated above. We see that Ronny has 50K, so there’s no issue here. Lyria on the other hand has 10K. There’s no issue here either. But with Jeyz, who has 65K in damages. He’s not going to get the full 65K. So, let’s just knock that down to 50K which is the limit “per person”. It’s also the most your insurance company will pay out.
Moving on, let’s go down to the entire incident.
What we need to do is add all the numbers from the example above. Because the cap for that is 100K. So, we look at no more than 50K “per person” but then we have to take a step back and look at the entire accident itself. So, at this point we add all the medical expenses.
50,000 + 50,000 + 10,000 = 110,000
We got a total of $110,000 from the accident. But now we have an issue because our “per instant” cap or our policy cap is 100K. So, now we know we can’t pay the 110K or the insurance company isn’t gonna pay the 110K. The most it’s going to pay is 100K. In this example the insurance company pays $100,000.
Now, let’s take a step back here and let’s think of the actual damages you caused. The actual damages you caused were 50,000 plus 65,000 plus the 10,000. If you add those numbers up, you actually get 125,000. So, there’s 125,000 damages as the actual damages.
Now, let’s subtract the 100,000 that the insurance is paying from 125,000 which is the actual damages. This will leave us with $25,000. This 25K represents the out-of-pocket costs. You’ve done 125,000 dollars in total damages here and your insurance is only covering a hundred that will leave you on the hook for $25,000 in damages.
Ronny, Jeyz and Lyria can if they choose to come after your assets. They can hire attorneys and say you still owe us this $25,000 in damages. Which of course is not covered by your insurance. So, they can try and have your assets seized and so forth to try and get this $25,000.
Here’s what you can do
You can pay more for your insurance premium every month or every 6 months. You can pay more to bump up your split numbers or the bodily injury coverage. Instead of 50/125 you can do 1 million dollars of coverage.
Let’s say you want 1 million per person. Another 1 million per occurrence. Think about this, if you injure someone with a vehicle. You could seriously harm somebody and cause up to a million dollars of damages. By just paying maybe an extra dollar every 6 months. You can actually get your policy limits higher. Well you should get them higher, maybe 500,000 or 300,000 or even a million or something like that. Whatever you can afford. You are actually buying yourself peace of mind in the off chance that you cause an accident that harms some people. Then you at least know that you’re not going to have all your assets taken away and go into debt for hundreds of thousands.