Is my auto liability coverage still adequate?

​Question you asked: Is my auto liability coverage still adequate? 

Member Thomas M. writes, "Many years ago, I increased my auto coverage limits to what was, I think, a pretty generous level at the time. But that was decades ago, and I really have no intuition about what constitutes appropriate coverage these days. What circumstances warrant lower or higher coverage levels?" 

That's a great question and one we hear a lot. The comforting news: The vast majority of accidents are settled within policyholders' auto insurance limits. It's the outliers – the catastrophic serious injury crashes – that cause concern, and they're probably the kind you're wondering about. In those accidents, people deemed at fault risk being sued to recover damages (medical bills, pain and suffering, loss of the ability to work, etc.) if their insurance limits fall short.

 Unlike your auto policy's collision and comprehensive coverages that automatically follow the market value of your car, liability coverage (the amount your policy would pay in damages to someone else if you're responsible for an accident and legal defense costs) isn't a set-it-and-forget-it purchase. Costs for medical care, car repair and legal representation tend to climb faster than the rate of inflation. And in recent years, jury awards have increased, too.  

Your own changing financial picture also is important. Your insurance limits should equal your assets, safeguard future earnings, investments and inheritances and adjust for any new risk factors (like a teenage driver on your policy). The state-mandated minimums for liability insurance aren't a reliable guide since, in a serious crash, they're almost certain to fall short. Higher limits are appropriate for most people, with 100/300/100* being the most popular choice among PEMCO members.  

For some, an umbrella policy, which adds an additional $1 to $5 million in liability protection on top of their existing coverage, is the solution. If you have significant assets to protect (or are a new grad embarking on a high-compensation career), we recommend you talk it over with your financial adviser or attorney. Select classes of assets are shielded from liability judgments, for example, retirement funds in an employer-sponsored 401(k), but asset vulnerability isn't always clear cut.  

Our best advice for a first step: Check in with your local PEMCO agent, log in to pemco.com or call 1-800-GO-PEMCO for a free insurance review. Not only can you adjust limits if your current circumstances warrant, but you may be able to save money if you qualify for a new discount that's become available since your last renewal or if you're driving less than you used to.  

*Insurance liability coverages are often abbreviated like this. 100/300/100 means injury coverage up to $100,000 per person for a total of up to $300,000 per accident; plus $100,000 for damage to property like cars, trailers, buildings, fences, etc.