Bodily injury coverage, while one of the most vital aspects of your auto insurance policy, is one of the least understood. New York State requires you to have bodily injury coverage to register a car for the road. As an insurance specialist, I’ve written this necessary coverage component into the policies of many clients over the years, but I still had to explain how it works.
First and foremost, it is the foundation of your auto insurance policy. Not only is it essential to get your car on the road, but it is also the cornerstone of your policy if you cause an accident. Nothing else trumps it. In this article, I’ll unpack the reasons why bodily injury coverage is essential using some of the most common questions I get on the topic, starting with this one:
What Does Bodily Injury Insurance Cover?
I’ll unearth what your bodily injury limits cover you for. But first, think back to the last time you drove past a terrible accident. Like many, you turned your head a bit to see the aftermath.
Do you recall smashed-up cars, an ambulance, and the police? We’ve all seen our share of these. Some were worse than others. There is one thing all those accidents had in common. Somewhere in that chaos was the driver that caused the wreck.
Do you know who else was there? All the people hurt or even killed in that accident. Enter bodily injury coverage.
Bodily injury insurance coverage is used to compensate those affected in the accident. This does not cover the bodily injuries to the driver who caused the accident, only those injured because of it.
The coverage does live up to its name and pays for injuries—or the medical costs to treat the victim(s)—but it also pays for their loss of income if they cannot work after the accident. Since death is the ultimate injury, you can add funeral costs to the coverage.
Your bodily injury coverage also handles the pain and suffering of victims. Yet, that can be hard to figure out and usually involves a lawsuit. Fortunately, your legal expenses are also a part of bodily injury coverage.
What Do Bodily Injury Coverage Limits Mean?
The state requires you to have at least $25,000 for any person injured and at least $50,000 available for the entire accident. This is called split limit coverage. If you’re like others, you might find this part confusing. Let’s bring it into focus.
The most one victim of an accident can collect is $25,000, and $50,000 is the total we have to work with. You’ll see this listed on your policy as $25,000/$50,000. Below are some real-world examples of this in action.
- Example 1: Suppose Steve suffers $33,000 in injuries. Since $25,000 is the most one person can get, you don’t have enough to cover all of Steve’s expenses, and Steve could sue you for the difference.
- Example 2: Steve and Sarah were each injured in an accident you caused. Steve’s injuries totaled $18,000, and Sarah’s were $21,000. Since each fell beneath $25,000 and their combined total was less than $50,000, enough coverage was available.
- Example 3: Steve, Sarah, and Kristy were all injured in an accident you caused. Steve’s injuries totaled $15,000, Sarah’s were $20,000, and Kristy’s were $23,000. At first glance, it seems all is good here too, but sadly, it isn’t. The combined losses of $58,000 are $8,000 above the $50,000 limit, and you are on the hook for the difference.
The formula we just described remains the same regardless of how much coverage you have. So, it’s time to answer a critical question:
What is the Recommended Amount of Bodily Injury Coverage?
You should have as much coverage as you can afford to buy as long as you don’t settle for the lowest liability limits or state minimums. As the saying goes, “anything is possible,” and there is no way to know how bad a future accident could be. Any savings or assets (including retirement) will be at risk if you run out of liability coverage.
Even without assets, an injured person could still be compensated through wage garnishment. Wage garnishment means your paycheck has money removed for another person’s benefit. It’s best to reduce the likelihood of this and add more coverage.
Many law practices are built on representing people injured in an auto accident. They leave no stone unturned when looking for ways to get compensation for their clients. The more coverage you can buy—even if that means adding an umbrella policy—the more you can refer them to your insurance company.
What Will it Cost Me to Add More Coverage?
You have now arrived at the most positive part of the bodily injury coverage topic! Adding more coverage is not expensive and doubling it will not double your price. In fact, you can often go much higher without experiencing a tremendous increase in cost.
Should the cost of adding more go beyond your budget, there is one thing you can consider. If you have comprehensive and collision coverage on a vehicle, you could increase its deductible. Raising a deductible from $500 to $1,000 could free up enough money to buy more liability insurance. It will likely be easier to find $500 to fix your car than to find $100,000 to settle an injury lawsuit!
Ask your agent for the cost differences on all available liability options. Doing so will allow you to make an informed decision.
Are There Any Other Details I Should Know?
Yes, there are a few points worth making to wrap things up. Below is a brief list of those final pieces.
Bodily injury coverage is policy-wide. This means that it is the same amount of coverage for all the vehicles. One car does not have a separate amount compared to another on the same policy.
- We mentioned split limit coverage earlier. That is the most common way to get bodily injury coverage. But you can also choose combined single limit coverage. Single limit coverage removes the individual limits and acts as one total amount. Not all insurance companies offer single limit coverage, and those who do usually charge more for it.
- The insurance company chooses your lawyer. It is the carrier’s decision since they’re paying to defend you. So, even if you want them to call Saul, they’ll call Doug.
- The carrier can settle at any time and doesn’t need approval. As much as you believe the other person was barely hurt, the carrier might cut their losses and settle. That is especially true if they see costly litigation in the future. If it’s cheaper to settle, they will.
You have now learned what most people only learn after it’s too late. By understanding how bodily injury coverage works and its importance, you are more likely to make an informed decision. Want more car insurance liability information? Check out our articles What Does Property Damage Liability Pay For? and How to Get Car Insurance.
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