I spoke to a group of people today about car insurance, specifically what a typical Texas policy includes and how to determine the right amount of coverage for each person. I enjoyed the interaction and questions that arose from the presentation and felt like everyone learned how to better evaluate their car insurance needs.
To provide a frame of reference, we’ll focus on liability coverage as that’s the foundation of any car insurance policy. Liability coverage is what protects you financially when you hit another car, truck, or object. Most Texas drivers have what are referred to as split liability limits because there are represented by 3 numbers such as the ones below.
- 30/60/25
- 50/100/50
- 100/300/100
- 250/500/100
- 500/500/100
Each number represents coverage in thousands, such as 30,000/60,000/25,000 and corresponds to a specific amount of liability coverage the policy will pay when you’re involved in an at fault accident.
The first two numbers address medical coverage with the first number representing the maximum amount of medical coverage available for any one individual in the car you hit who’s injured. The second number is the maximum amount paid for all individuals in that car. Regardless of your chosen limit, no one person receives more than the first or individual number.
The third number represents property damage coverage. This is the maximum amount paid to total or repair the damage caused to the car, or multiple vehicles, or object(s) you hit. The average price of a new car is about $34,000. $50,000 may be enough to cover most cars, but it’s not enough to cover most premium models.
The minimal amount of coverage required for Texas drivers is 30/60/25, however, I believe this amount is inadequate for most clients due to the cost of a new car. Instead, I use the following guidelines when discussing the proper amount with a current or prospective client.
|
Limits |
Recommendation Criteria |
| 50/100/50 | This is the minimum limit I recommend as it will protect a new grad working in their first job if they hit most new cars. |
| 100/300/100 | Home or condo owners & people with a combined household income of $50,000 to $100,000 a year. |
| 250/500/100 | People in middle to upper management, business partners, doctors, dentists, lawyers, architects, people with a swimming pool or trampoline, or people with a combined household income of $100,001 to $150,000. |
| 500/500/100 | Families with a combined household income of $150,001 or greater, the professions mentioned in the prior level, and home owners with a home valued at more than $500,000. |
The importance of having higher limits, if you fit these criteria, is you’ve crossed the line from simply protecting your vehicle(s) to protecting you financially in the event of a lawsuit. Higher limits don’t keep you from being sued, but they go a long way to protecting your assets.
How much car insurance do you have? Is it enough? Let me know your thoughts and questions by sharing them on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!
