What is Liability Insurance?

Sure, most of us buy insurance to protect our stuff. Obviously, you must have nice stuff to protect  – why else would you be reading a blog about insurance? Yes, a big part of what we sell is property insurance, but what about the other part of insurance  – the one that protects you above and beyond the specific dollar value of one piece of property That, dear reader, is called “liability insurance”.  Most personal policies that you pay for already have liability insurance, so isince you are already paying for it, you may as well understand how it works.

Generally, the largest amount of liability coverage most people have is attached to their home insurance policy. In our agency, we generally try to steer our clients to buy the most liability insurance that they can on their home; not because it raises the premium, but for the amount of value per dollar spent. The difference in premium between the minimum liability amount of $100,000 and $500,000 is generally in the range of $100 a year. This is an incredible way to invest your insurance dollars – where else can you buy $400,000 extra worth of anything for $100? Nowhere but insurance.

Liability coverage, at its core, protects you from lawsuits that may be filed against you. Yes, if your negligence causes injury like if the tile you keep meaning to fix finally breaks and your neighbor breaks his leg. However, the big value in liability insurance is in your legal defense. Talk trash about your neighbor and get sued? Liability coverage to the rescue. The standard amount of liability insurance on most policies is $100,000, but if you have priced a lawyer lately, you understand how much more coverage you really need. It’s the cheapest part of your home insurance, pound for pound, so you should bump it has high as you can. You never know when you will need it – or exactly how much trash your wife talks about the neighbors.

Auto liability is the liability coverage most people are familiar with – and like home insurance, it really shouldn’t be skimped on. Auto liability coverage is generally divided into three numbers – ex. 100/300/50. These three numbers represent $100,000 bodily injury per person/ $300,000 bodily injury per accident/ and $50,000 in property damage to others per accident. State generally set a minimum amount of coverage that is acceptable; in Texas it’s 30/60/25. Should you ever “rock the minimum”? No, for two main reasons.

1. It’s too low. If you are in a major accident and are left short, the damages you cause still have to be paid. If you total one Mercedes, or even a brand new Ford F150, you will come up well short on property damage. That money still needs to be paid. Guess who is responsible?

2. Higher limits of liability can actually save you money in the long run. Even if you are never in an accident, carrying high liability limits shows insurance companies that you are a concerned driver. One of our main functions here at The Phoenix Insurance is to shop your insurance for you when (not if, but when) your insurance premiums go up. It’s easier to get a better deal if you carry higher liability limits. Insurance companies like to insure responsible drivers, and nothing says “responsible” to an insurance company like high auto liability limits.

Remember up there where I said that home insurance is “generally” where people carry most of their liability insurance? I said generally because some (sadly not all) people carry an excess liability or “umbrella” policy. An Umbrella policy generally covers you for $1 million in excess of the liability coverage on your home and auto insurance. If you have been picking up what I have been laying down in the rest of this blog, you are starting to realize that higher liability limits are always better. With higher limits your assets are better protected. Yes, I said assets. While liability insurance does not specifically cover a specific piece of property for a certain value, it is there to prevent you from having to sell that piece of property off in order to defend yourself in court. You are already paying for liability insurance. Is it enough? An umbrella policy on top of whatever you have is generally cheap – usually under $300. Isn’t your peace of mind worth at least that much? Even if you choose not to get an umbrella policy, make sure you carry high enough limits on both your home and auto insurance at least. Call one of our agents today and continue the discussion about liability coverage.

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