How Much Bodily Injury Liability Insurance Do I Need?

Many believe that adding medical to their car insurance protects them from loss related to these expenses. Unfortunately, medical coverage only extends to the passengers in your car. To protect yourself from law suits arising from bodily injury to others, you must have adequate bodily injury liability insurance. This type of insurance is required by law. Although buying the minimum may take care of your legal requirements, these amounts can easily be exhausted in a major accident. You can be left financially exposed.

To determine how much bodily injury liability insurance you need, a listing of your assets is necessary.

Take your time when making this list. It should be as complete as you can make it. Everything on this list can potentially be seized and sold to pay for your loss in an accident that causes bodily injury to others. Make sure that home equity is included in this total. Add up the value of all of the items on the list. This the starting point for computing the amount of bodily injury liability insurance you will need.

Try to estimate your earnings for at least the next 5 years.

Lawsuits can attach future earnings as a way to satisfy a large judgment against you. If you make $50,000 per year of household income, you have a quarter of a million dollars or more at risk in future earnings. Add this amount to your assets. Do not expect a bankruptcy judgment to clear this type of debt. Often, these debts are excluded from amounts forgiven through bankruptcy.

In compiling your final totals, take into consideration retirement accounts.

While some laws restrict what type of accounts can be tapped to collect the judgment amount, not all retirement accounts are exempt. The same is true for whole life and other insurance policies that build cash value. In short any asset that can be converted into cash is considered fair game to pay off the lawsuit.

For many people this total can touch a half million or more dollars at risk.

Enough bodily injury liability insurance needs to be purchased to comfortably cover this amount. Because assets grow and income increases, it is wise to buy at least 50% more coverage than you anticipate needing. This should give you adequate financial protection until your next car insurance review in three to five years. Should you experience a significant increase or decrease suddenly in your financial picture, visit the issue immediately to make the proper adjustments.