How much personal insurance is enough? Important considerations

By Higginbotham on September 13 , 2016


You’re a good driver. You obey the speed limit, you use your turn signal, and you never use your cell phone while driving. So you don’t need to worry about auto liability, right?


Even good drivers can slip, and it only takes one second. One second when you are distracted by a squirrel running across the street and fail to see the car turning ahead of you. One second when your coffee spills on you, causing you to swerve into the next lane. Or, one second when a sudden sneezing fit makes you lose control of your car. These “one seconds” happen more often than you think.

That’s why state laws require liability coverage. In Texas, drivers must carry liability coverage for a minimum of $30,000 for each injured person (with a total of $60,000 per accident) and $25,000 for property damage.

If you live in Texas, there’s a good chance that this is all the coverage you have. It probably seems like a lot, and you may have never stopped to contemplate if you might need more. However, as with many things in life, the minimal requirement is not the optimal situation.

How much auto insurance coverage is enough?

Let’s really look at the numbers. Texas drivers must have insurance to pay for $60,000 in bodily injury for each accident. This figure doubles the $30,000 per person minimum, effectively assuming that only two people will be injured. But as we all know, more than two people may be hurt in a car accident. Furthermore, due to expensive health care costs in the United States, $30,000 per person may not be enough to cover major injuries. In the worst case scenario, if you were involved in an accident that resulted in a fatality or a major disability, you could be looking at damages of a million dollars or more.  

Your insurance policy only pays up to the policy limits. After that, your own personal assets could be at risk.

Next, let’s look at the property damage minimum, currently set at $25,000 in Texas. In 2015, the average cost of a new car was $33,560 according to Kelley Blue Book. Clearly, if you total a new vehicle, there’s a good chance the minimum coverage won’t be sufficient.

To make matters worse, according to a study from the Insurance Research Council, auto injury claim costs are rising.

So how much coverage should you have? It’s hard to give an exact number because each accident is different. However, to protect yourself, it’s wise to have enough coverage to match your assets. In other words, if you have $500,000 in personal assets, you want $500,000 in coverage.

Another good option: The umbrella

There is another option to give you an added layer of protection: Umbrella coverage. Umbrella plans provide liability coverage for expenses that go beyond what’s covered by your normal auto and home insurance plans. Umbrellas policies are especially a good idea for families who entertain a lot; have teen drivers; have swimming pools, pets or home-based businesses; or a lot of assets to protect.

Just imagine these scenarios

  • You throw a party and a guest over-indulges and kills a pedestrian while driving home…
  • Your yellow lab decides to tackle a motorcycle as it cruises down your street…
  • Your teenager gets in a major accident with a carload of other teenagers…
  • A client visits your home office and slips and falls on your front step, ultimately requiring back surgery…

These are all incidents in which higher policy limits and the added protection of an umbrella policy could be helpful. Ready to ramp up your protection levels? Contact us for a home and auto insurance assessment.


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