According to the Virginia Department of Motor Vehicles, there were 123, 579 traffic crashes reported in Virginia in 2012, many of which were serious and resulted in personal injury. With such frequency of occurrence, it is important to have adequate automobile insurance coverage. In Virginia, auto insurance policies must only include liability coverage of $25,000 for the death or injury of one person, $50,000 for the death or injury of two or more persons and $20,000 for property damage. This legal minimum will be inadequate in many car accident situations.

Purchasing additional liability coverage may save you from serious financial loss if you cause an accident with personal injury. While the above-mentioned minimums have remained the same for decades, it is not unusual by today’s standards to see lawsuit settlements and verdicts of $100,000 or more against at-fault drivers. Auto insurance companies tend to be against increasing legal insurance minimums because it is not beneficial to them: Higher coverage levels generate only small amounts of income for insurance companies, but expose them to much higher potential payments for damages. Likewise, insurance companies may not try to “up-sell” you to purchase a more expensive insurance package because they make most of their money selling the minimum coverage, which carries the least amount of risk for the company.

In 2009, proposed legislation unsuccessfully sought to increase the legal insurance minimums to $100,000 in cases of bodily injury to or death of one person, $300,000 in cases of bodily injury to or death of more than one person in any one accident, and to $100,000 for property damage coverage. Such proposed minimums may be more realistic guidelines for the minimum amounts of liability coverage that today’s motorists should have. You will want to speak to your insurance company, a lawyer, and/or a financial professional when deciding how much coverage to purchase.

Protect Yourself from Others with Poor Coverage

A good auto insurance policy should also include more than the minimum of underinsured and uninsured motorist (UM/UIM) coverage offered by your insurance company. Many drivers carry minimal insurance, i.e., the “cheapest” policy available, or no insurance at all. Your UM/UIM coverage compensates you for injuries caused by drivers with liability coverage that is lower than the amount of your UM/UIM coverage. So, if the at-fault driver is only insured for $25,000, but your medical bills amount to $50,000, your UM/UIM coverage should kick in up to its limit. UM/UIM insurance is very important due to the common difficulties in collecting personal injury judgments against drivers with inadequate coverage. In such a case, proper UM/UIM coverage can protect an injured party and enable settlement and near term resolution. Insurance companies are required to offer you the same amount in UM/UIM coverage that you have purchased in liability coverage. So good liability coverage, as discussed above, is a necessity to obtain good UM/UIM coverage.

When buying insurance, also remember that liability coverage only pays for damage that you cause to others. UM/UIM insurance pays for losses to you as an injured party but only if caused by an uninsured or underinsured driver. You may want to consider options such as collision or “comprehensive” coverage, which pay the cash value of your vehicle if it is stolen or destroyed, or medical expense benefits coverage, which pays for certain expenses regardless of who caused the accident. In considering the above information, you should also keep in mind your personal situation and finances. You can discuss and compare options with different insurance companies and seek advice from an attorney and/or financial advisor.

Why an Umbrella Policy Can Save You On a Rainy Day

It is often a good idea to purchase an “umbrella policy” to complement auto and homeowner’s insurance. Umbrella policies are relatively inexpensive and can fill in the gaps where your auto and homeowners insurance will not cover losses.

An umbrella policy can protect you in the event of a devastating lawsuit. Despite best intentions, anyone can find themselves accused of negligence for causing injury to another. Suppose you accidentally hit a pedestrian while driving or someone severely hurts themselves on your property. The claims against you may go above and beyond the amount of your regular insurance coverage even if you are well-insured. The costs of on-going medical care, bills, lost income, and other damages can add up to millions. When your insurance is exhausted, the injured party’s lawyer will not only attempt to compensate his/her client’s losses with your current personal assets but can also go after your past, present and future earnings through garnishment. Attorneys’ fees incurred to defend your case can also add up even if you win.

You will want to speak to your insurance company, a lawyer, and/or a financial professional when deciding how much umbrella coverage to purchase. However, your umbrella coverage should exceed your net worth as a starting minimum. Keeping in mind that there are rarely one-size-fits-all answers, many impartial professionals will suggest a minimum of one million dollars in coverage. The price varies, but a one million dollar policy may cost the average consumer around $200 annually. To be eligible to purchase an umbrella policy, insurance companies will typically require that you carry more than the minimum liability insurance required by law; that however, is usually a good idea anyway (see insurance coverage article).