Can I be sued for more than my auto insurance liability limit?

| Auto insurance, Auto Safety.

Can I be sued for more than my auto insurance liability limit

Can I be sued for more than my auto insurance liability limit? This is a question we hear occasionally and the short answer is a resounding yes. We recently had a customer call our office to lower her auto insurance liability limits to the basic state minimum. Her reasoning was that she could not be sued for an amount higher than her coverage limit. This information had come from a friend who works for a law firm and was “very knowledgeable”.

The simple fact of the matter is that your auto insurance liability limits have nothing to do with the damages you owe another party. Failing to purchase adequate auto insurance liability coverage could leave you in financial ruin very quickly.

Auto insurance, like any other insurance policy, is simply a contract between two parties: the insurance company and the policyholder.   The insurance company agrees to pay claims in good faith, subject to the terms and conditions of policy contract. Understanding the policy terms and conditions is critical and underscores the importance of reading your insurance policy. In the case of auto liability claims, the insurance company is obligated to defend and settle claims up to the coverage limit.  That means once the insurer has paid out policy limits they are no longer obligated to defend the policyholder.   Any claim for damages beyond the coverage limits is the sole responsibility of policyholder to pay.

The minimum auto insurance liability limit required in Nevada is very low. The statute that specifies this coverage limit was written in 1979 (NRS 485.185) and the required coverage limit has not changed.   That minimum limit – 15,000/30,000/10,000 – is hardly adequate for all but the very smallest of auto accidents. In fact, the average auto liability injury claim in 2012 was $14,653.   And, the average cost of injury claims has steadily increased between 4% and 8% annually.

Here’s the bottom line: you can be sued above the limits of your auto insurance liability coverage. Even a moderate accident with injuries will likely exceed the minimum required coverage limits. Fortunately, buying an auto insurance with higher limits of coverage is surprisingly affordable. Policyholders should also consider a personal umbrella to provide an extra layer of protection over auto, home, and other policies.

At Safeguard Insurance, our personal auto insurance experts can help you find the right policy at the right price.  Call us at 702-638-0022 or visit our auto insurance quote page for instant rates.

Additional Resources:

NHTSA Auto Accidents Statistics (Nevada)
RMIIA Cost of Auto Accidents

Image: Robert Crum/123rf