Bodily injury liability limits on your auto insurance policy probably aren't something you think about often, if at all. Or they could cause nightmares.
Not having the proper limits, especially if you have assets to protect, can keep you up at night. It doesn't have to be that way.
Why you need bodily injury liability insurance
Most states require drivers to have minimum amounts of this type of insurance. Called BI for short, bodily injury liability coverage pays if you hurt other people in a car accident that's your fault. After a fatal crash, it can cover their medical expenses, recovery, lost wages, and funeral costs.
But if you don't have enough insurance coverage and their medical costs exceed your limits, then you may be sued in court to cover the remaining expenses. This means coming up with the money on your own to protect your financial responsibility, such as pulling cash out of investments or selling your home.
Your car insurance company probably sells extra coverage beyond the state minimums, though it may also have a maximum amount offered. You may then want to buy an umbrella policy to cover your liability. Here, we'll go over types of liability insurance, focusing specifically on bodily injury liability.
What is liability insurance?
You may already think you're covered by general liability insurance if you cause an accident and injured someone. After all, you're not an insurance expert, and renewing a policy doesn't require going over every little detail.
But it's worth being aware of, mainly because not having enough insurance can lead to some of the most significant expenses you can face if you cause an accident. There are two kinds of liability car insurance:
Bodily injury liability coverage
Bodily injury liability pays for medical expenses or a funeral if someone is injured or killed in an accident in which you're responsible.
It can also pay for the other person's loss of income if they can't work, rehabilitation, pain and suffering, and legal fees.
Property damage liability coverage
Property damage liability pays for damage you cause to vehicles or other property when you cause an accident. It can also pay for broken items on the other driver's car, as well as legal bills or court fees if you're sued.
What isn't covered by liability insurance
Liability insurance doesn't cover your medical bills or repairs to your car. It's only meant to help others in the event you caused an accident.
Since BI doesn't cover your medical bills, you'll have to use your health insurance for any medical help you need.
If another driver is at fault and you're injured, their insurance should cover your medical costs.
How liability insurance coverage works
Liability insurance comes in two forms: combined single limit policies and split limit policies.
A combined single limit policy provides a certain amount of coverage and you decide how to divide it between bodily injury and property damage.
A split limit policy provides set amounts. One is per person, and the other is per accident. It's usually written as a split number. The first number is the maximum amount paid for injury expenses for one person involved in the accident, and the second number is a limit per accident.
An example is 25,000/50,000, or as 25/50. It covers up to $25,000 per injured person and up to $50,000 per accident.
If BI costs a total of $30,000 for one person, you'd be responsible for $5,000 because the policy limit is $25,000 per person. If another person were injured, the total payout would be up to $50,000.
One law firm puts the average cost for hospitalization over the lifetime of a car crash victim at $57,000. With a $50,000 BI limit per accident, that would require the policyholder to come up with at least $7,000 on their own.
State bodily injury requirements
Almost every state requires a minimum level of bodily injury liability insurance. Only Florida and New Jersey don't require BI.
Several states that require minimums offer drivers the option to "self-insure" by showing they can pay for any expenses from an accident. Drivers may have to post a bond or deposit money with the state.
New Hampshire, for example, doesn't require having auto insurance at all if someone has enough money to pay for an accident. If they buy insurance, as most people in New Hampshire do, they must meet the state's minimum requirements.
Bodily injury requirements by state
|State||Minimum liability coverage per person||Minimum liability coverage per accident|
|District of Columbia||$25,000||$50,000|
Determine how much you need
You should review your insurance policy each year with your insurance agent to see any coverage gaps. Your circumstances may have changed. If you got a new job and bought a new house and now have a spouse and child, you may have so many assets and expenses to cover that higher coverage that's far beyond the state minimums is necessary.
A more expensive home, investments and other assets can be protected with a higher liability policy.
Totaling another car and injuring four people can easily exceed your liability limits, especially if you get the minimum coverage required in your state. Without extra coverage, you could lose your home or have your wages garnished.
A general rule is to have enough liability insurance to cover your net worth. That's the value of your cash and things you own, minus your debt. You should have enough liability insurance to cover bodily injury and property damage claims.
Consider an umbrella policy
Some insurance companies have a maximum amount of BI limits, such as up to $500,000. If that doesn't cover your assets, you may want to look into buying an umbrella policy.
This extra insurance covers people with more assets than the insurance they already have. It's also meant for people with a lot of risks, such as owning rental properties or expensive cars.
An umbrella policy costs about $150 to $350 per year for the first $1 million of coverage, and about $100 per $1 million of coverage after that.
Most insurers that sell umbrella insurance require buyers to also buy their home and auto insurance from them. According to the Insurance Information Institute, they also require having at least $250,000 in BI coverage per person and $500,000 per accident before adding an umbrella policy.
You don't own a car, but still drive
If you don't own a car but drive someone else's from time to time, you can still be sued if the car doesn't have enough insurance to cover the medical bills of anyone injured in an accident you caused.
Non-owner car insurance offers auto liability coverage only and is usually for cars you borrow or rent from someone outside your household. Otherwise, you should be added to the policy of whoever you live with.
Blame medical costs and speeding
We'll get into the costs of BI insurance next, but it's worth knowing what caused this need other than people not wanting to get sued for damages they can't afford after causing an accident. One reason is that insurance companies have to pay so much for BI claims.
Bodily injury liability is second in standard coverages in the percentage of what makes up an auto insurance premium. Data from the National Association of Insurance Commissioners shows that bodily liability coverage accounted for 24% of auto insurance premiums in 2012. It was only surpassed by collision coverage, which was 26% of an insurance premium.
Two areas to blame for higher BI costs are increasing medical expenses and higher traffic deaths in states with high speed limits.
According to the Insurance Information Institute, bodily injury claims have grown faster than inflation, in part because medical inflation rises more quickly than inflation overall. The more severe the injuries are for a crash victim, the higher the settled claims.
The III says that severe injuries and death in traffic accidents are most common in states where speed limits have been raised. Higher speeds resulted in at least 33,000 additional deaths from 1993-2013 in 41 states that raised speed limits, according to a study by the Insurance Institute for Highway Safety, or IIHS.
Here are states with speed limits of 75 mph or higher. All are on rural interstates:
- Arizona: 75 mph
- Arkansas: 75; trucks: 70
- Colorado: 75
- Idaho: 75; 80 on some segments; trucks: 70
- Kansas: 75
- Louisiana: 75
- Maine: 75
- Montana: 80; trucks: 70
- Nebraska: 75
- Nevada: 80
- New Mexico: 75
- North Dakota: 75
- Oklahoma: 75; 80 on some segments
- Texas: 75; 80 or 85 on some segments
- Utah: 75; 80 on some segments
- Wyoming: 75; 80 on some segments
Adding extra bodily injury liability coverage isn't too much money, especially considering the amount of coverage you can get over the state minimum.
Below are examples of the extra costs for a driver with a clean driving record, a driver with a recent speeding ticket, and one with a recent accident. These are extra annual costs for additional BI coverage beyond a state minimum of $25,000/$50,000 coverage. It includes $50,000 in property damage liability, collision, and comprehensive insurance with $500 deductibles.
|Clean driving history||$16||$72||$154|
|Recent speeding ticket||$20||$88||$176|
100/300 is common
An expected amount of BI coverage that insurers will offer is $100,000 per person and $300,000 per accident, also shown as 100/300 or $100,000/$300,000.
Research by Forbes Advisor that for such coverage, along with $100,000 in property damage liability coverage and a $500 deductible, the average rate in California for good drivers was $2,398 per year. That's the total cost for a car insurance policy, and Forbes didn't break it down into what just bodily injury liability coverage would cost on its own.
Another researcher found that the annual premium for bodily injury liability was $532 for $30,000 in coverage, rising to $589 for $100,000 in coverage.
- You're covered. With the right amount of bodily injury liability insurance, you can sleep better at night knowing you have enough insurance if you cause an auto accident.
- BI is relatively inexpensive at around $150 or so per year for $500,000 in coverage per person and per accident if you have a clean driving record or just a speeding ticket.
- You can buy an umbrella policy for about $250 more per year to cover $1 million in coverage.
- State minimums are usually low, so making up the difference between that and the medical bills of people injured in car crashes that you cause can be considerable.
- Without extra BI insurance, you could lose your home and other assets.
- BI doesn't cover your medical bills.
The bottom line
We're all for a good night's sleep. Adding to your bodily injury liability coverage to cover your assets in the event you cause an accident can help you avoid having to come up with the money on your own for the medical expenses of people in a car you hit. Extra BI insurance can put your mind at ease.
That can make driving easier and maybe even a little more relaxing. To find out how much extra insurance you may need, add your assets and talk to your insurance agent.