Minimum auto limits will cost you

Auto insurance is expensive…

And rates continue to rise. There are more cars on the roads and drivers are traveling more miles than ever. Add in distracted driving due to new technology (74% of drivers use Facebook while driving!) and overall driver fatigue due to our busy lifestyles and it is no wonder that traffic fatalities increased 6% to a 10-year high in 2016.

Insurance companies have naturally responded to the increased risk exposure by increasing their insurance rates for every policyholder. For insureds with a clean driving history this can be a tough pill to swallow. To reduce their insurance costs many people, shop their coverage to find the lowest possible price.

Not all policies are the same

Many people assume that insurance policies are the same from company to company. They understand the concept of a deductible, but the policy limits are not as easy to understand. If you are not 100% sure about what you are buying, beware of the “name your price” options that force consumers to focus on the premium instead of the coverage. Naming a lower price is usually achieved by significantly lowering your coverage. Some companies even try to sell you by “cutting your premium in half” when what they are really doing is selling you a 6-month policy instead of a 12-month policy.

Minimum limits, split limits, combined single limit, what’s the difference?

In Rhode Island the minimum auto liability limit required by law is $25,000/$50,000/$25,000. Right of the bat, the average policyholder has no idea what those numbers mean. Rhode Island’s minimum limit requirement is a split limit, as indicated by the three numbers provided. Here is what the $25,000/$50,000/$25,000 split limit means:

  • $25,000 per person for bodily injury
  • $50,000 per accident for bodily injury
  • $25,000 per accident¬†for property damage

So, if you were in an at-fault accident with RI state minimum limits, you are covered up to the first $25,000 for each person injured in the accident up to $50,000 total. After the per person and per accident bodily injury limits are reached, you can be held personally liable for any additional expenses beyond that limit.  Similarly, any property damage you cause above the $25,000 limit becomes your responsibility.

Split limit policies are offered with higher limits, however, finding the right mix of bodily injury and property damage limits can be a challenge. Many insurance companies also offer combined single limit (CSL) policies that remove the guesswork of the split limit policies. Instead of trying to figure out specific bodily injury or property damage costs and apply them to the applicable limit, they offer one limit of coverage for any type of claim scenario. So, if you have a $300,000 CSL policy you are covered for any bodily injury or property damage you are responsible for up to that $300,000 limit regardless how the payments are divided between individuals, bodily injury or property.

So how much coverage do I need?

According to the Insurance Information Institute, in 2015 the average claim severity nationally for bodily injury is $17,024. In 2016, the average new-car purchase price is now above $34,000. It is easy to see how a severe car accident can easily exceed the minimum limits required to operate a vehicle in the state of Rhode Island. Medical bills can easily exceed the available limits especially if there are multiple passengers in each vehicle. Even if no one is injured, if you “total” an average-priced vehicle in an at-fault accident you will be on the hook for the $9,000 difference ($34,000-$25,000) between the value and your property damage limit.

Every policyholder is different and depending on: your financial situation, your personal or business assets, the number of inexperienced drivers on your policy and if the vehicle is being used for personal or business use, will determine what limit of coverage you should get. However, no matter what your situation is, the required state minimum split limit of $25,000/$50,000/$25,000 is not nearly enough coverage for any driver.

Contact our office today and we will be happy to review the coverages you have in place and give you some recommendations that will help you chose the correct limits for your individual situation. We have access to many different companies so we can give you price options without sacrificing your coverage. We can also suggest alternative solutions, such as personal or business umbrella policies, that will provide excess coverage not only to your auto policy but your homeowner’s or business owner’s policy as well.