Liability coverage is the part of your auto policy that protects your finances if you cause an accident, and it’s also the coverage most people set once and never think about again. Given how much medical and repair costs have risen, it’s worth revisiting whether your limits actually make sense for your situation.
What Liability Coverage Actually Does
Liability coverage pays for injuries and property damage you cause to others in an at-fault accident, up to your policy’s limits. It does not cover your own vehicle or your own injuries – that’s what collision, comprehensive, and medical payments coverage are for.
Why California’s Minimums Are Often Too Low
California’s required minimum liability limits were set with a different cost environment in mind. Medical bills from a serious accident can climb into six figures quickly, and a moderate collision can easily total a modern vehicle given rising repair costs. Minimum limits can be exhausted fast in a serious accident, leaving you personally on the hook for the remainder.
How to Think About the Right Amount
Your Assets
If you own a home, have significant savings, or other assets, you have more to lose in a lawsuit following an at-fault accident. Higher liability limits protect those assets from being pursued to cover a judgment beyond your policy limits.
Your Driving Exposure
Drivers who spend more time on busy Sacramento corridors like Highway 50 or I-80 have more statistical exposure to a serious accident than someone who drives rarely, which is worth factoring into your coverage decision.
Your Future Earning Potential
Even without significant current assets, future wages can potentially be garnished to satisfy a judgment, which is a factor worth considering when choosing limits, especially for younger drivers early in their careers.
The Cost Difference Between Minimum and Higher Limits
Increasing your liability limits from the state minimum to significantly higher limits typically costs much less per year than people expect relative to the added protection, since liability claims that reach higher limits are statistically less frequent.
Umbrella Policies for Extra Protection
For drivers with significant assets, a personal umbrella policy can provide an additional layer of liability protection beyond your auto and homeowners policy limits, often at a relatively modest additional cost given the added coverage.
Frequently Asked Questions
Is California’s minimum liability coverage enough?
It meets the legal requirement, but many agents recommend higher limits given rising medical and repair costs, especially for drivers with meaningful assets.
How much does it cost to raise my liability limits?
Often less than expected relative to the added protection, since higher-limit claims are statistically less common.
Do I need an umbrella policy if I have high liability limits already?
It depends on your total assets and risk tolerance – an umbrella policy adds an extra layer of protection beyond your standard policy limits, which can be worthwhile for higher-net-worth households.
Find the Right Liability Limits for Your Situation
Eugene C. Yates Insurance Agency can review your overall financial picture and help determine the right liability limits for your Sacramento household. Contact us today for a free policy review.