Under-Insured Drivers

I remain amazed at people of means who do not maintain sufficient liability insurance on their vehicles and homes.

The most frequent problem we see is with middle-income people who are driving around with "25 / 50" or "50 / 100" liability insurance policies on their cars.  A "25 / 50" policy is one which provides a negligent driver with insurance protection of $25,000 for any one person they hurt or kill in an accident, up to a total of $50,000 for all persons hurt or killed in an accident.  A "50/100" policy, provides a negligent driver with up to  $50,000 worth of insurance protection for any one person they hurt or kill in an accident, up to a total of $100,000 for all persons hurt or killed.

If there is insufficient insurance to pay the damages caused, the driver is personally responsible for the balance of the damages.  Thus, if a negligent driver with a "25 / 50" liability insurance policy on his car causes injuries to another person worth $50,000, the negligent driver is responsible for the $25,000 his insurance company does not pay.

So why are people under-insured? Greed, ignorance or both.  Some people simply accept the amount of insurance recommended by their insurance agent.  This approach fails to take into account that the agent may be competing on price, not product, and by offering an inferior product (lower limits) he or she can offer a lower price.  Like many things in life, the lower priced product is often not the best choice.

Other people think that even though they have a good income they have relatively little in the way of assets or net worth, and thus it makes no sense to buy more insurance coverage to protect themselves.  This approach is wrong for two reasons.  Number one, it assumes that the person you have injured will not force you into bankruptcy to get the assets you do have.  Number two, it reflects a very self-centered attitude, one which basically says "I am not worried about the harm I caused to another person.  I will by just enough insurance to protect my assets and let the injured person bear the financial brunt of my mistake."  This is wrong.

Still others think that they will never be involved in an accident and thus spending money on insurance is a waste of money.  

I understand why a person making minimum wage or even twice that amount will have difficult purchasing more liability insurance than the state required minimum ($25,000 per person, $50,000 per accident).   But quite frankly I have little sympathy for those who make $75,000 per year or more and are driving around with insurance policies that provide less than $100,000 person, $300,000 per accident in insurance coverage.  And those who make $100,000 or more per year in family income should have more coverage.  The extra insurance coverage is very inexpensive, and it just makes sense to have it, not only to protect your own assets, but to be there to help the person you hurt.

I encourage you to look at your liability insurance package and make sure you understand how much coverage you actually have.  Then, ask your agent how much it would cost you to increase that coverage to the next level.  My guess is that you will be surprised at how little it will cost.  As you do so, remember that one night in the ICU at Vanderbilt costs over $10,000 and the helicopter ride there can exceed that amount if the flight originates 30 miles or more away.  The fact of the matter is that $50,000 doesn’t go very far in a trauma unit.


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