Last week New England Patriots quarterback Tom Brady was involved in an accident after another driver allegedly ran a red light hitting Brady’s vehicle. Luckily, Brady was not injured in the accident because with a contract to make $6.5M per year, an injury affecting his professional career could have cost millions. In addition, Massachusetts has state minimum auto insurance liability coverage of $20,000 and a Brady injury could have left the other driver financially devastated. I realize that millionaire Tom Brady’s are not driving all over Lancaster PA roads but the story teaches 3 important lessons about liability auto insurance.
Lesson 1 – State Minimum Liability is Very Minimal
Pennsylvania has 2 state minimum liability limits that are required for every auto insurance policy. The first is called “Bodily Injury Liability” and it pays when you are liable for injuring someone else in a car accident. The PA state minimum amount of Bodily Injury Liability is only $15,000 for injuries to one person and up to $30,000 for one accident. The other state required liability coverage is called “Property Damage Liability” and it pays when you are liable for damaging someone else’s property, typically their car. The PA state minimum amount of Property Damage Liability is only $5,000 per accident.
Thus, if you are liable for a single injury totaling more than $15,000 or cause damage to a car that costs more than $5,000, the auto insurance coverage will run out and you will be personally accountable for paying the remaining balance. With the high cost of medical treatment and the average new car costing $30,000, you can see it would not take hitting a Tom Brady professional or a Tom Brady car to exhaust these state minimum limits quickly.
Lesson 2 – Reducing Liability Risks A lot for A Little
Everyone is looking for a way to save money right now and one place people are turning to is their auto insurance policy. I think that shopping your car insurance, reviewing your policy to maximize discounts or raising your deductibles are all great ways to reduce costs, however, reducing liability coverage is generally a bad idea.
Bodily Injury and Property Damage Liability are usually one of the cheapest coverages on the auto insurance policy and reductions in these coverages usually will not result in big cost savings. More importantly, liability is what protects your assets and family when you are liable in a car accident. Remember once your auto insurance liability limits run out, you are personally liable for the difference. Liability and your financial future are not worth risking just to save a few dollars.
Lesson 3 – Protect Yourself from Low Liability Insurance Drivers
Even if the person who hit Brady had excellent liability limits, it is still unlikely they would have had enough insurance to cover a serious injury to Brady. In this situation, Brady could have filed an “Underinsured Motorists” claim on his own auto insurance policy to cover his injuries after the other person’s liability ran out. Can you image the potential size of that Underinsured Motorists claim?
Even if you do not make millions like Tom Brady, a serious auto accident injury could still lead to very expense medical bills, lost wages and pain and suffering. In a down economy, many people are driving with state minimum or low liability insurance and Underinsured Motorists coverage gives you a resource to pay for your family’s injury when the other person’s insurance is not adequate. Make sure to find if you have this important optional coverage on your auto policy because you never know how much liability insurance the other driver may have.