Here’s Why You Don’t Have Enough Liability Insurance

Here at Excalibur insurance, our brokers recommend to our customers that they purchase at least $2,000,000 liability coverage for their Auto Insurance Policy.

You may be wondering, “why do I need that much liability coverage for my car insurance?”

This isn’t an easy question to answer quickly. Our brokers may respond with answers such as lawsuit amounts are rising, injury awards are increasing, or more lawsuits are being filed. While all of these are correct answers to the question, they don’t clearly explain the real-world consequences of not having enough liability coverage.

A Real-World Example:

The best way I can answer this question is to briefly describe a real-world example that happened to a friend of mine recently. While Bill wasn’t a client of Excalibur Insurance, he came to me for some friendly advice.

Bill was returning home from work a little less than two years ago. He was driving down a street in a small-town, heading to his house. A pedestrian unexpectedly stepped off the sidewalk and into the side of Bill’s car. The pedestrian was jaywalking. He wasn’t at a crosswalk and, to make things worse, he was talking on his mobile phone at the time of the accident. The bottom line: the pedestrian wasn’t paying attention and Bill had done absolutely nothing wrong.

The police and ambulance came to the scene of the accident. Everyone involved gave a statement and the pedestrian left in the ambulance. Bill was shaken up by the incident, but there was no damage to his car. Bill reported the incident to his insurance company, provided a statement to his insurance adjuster, and assumed that was the end of the matter.

Fast forward to now: Bill was at home when he was served with a statement of claim (meaning he was being sued) by the pedestrian for the injuries he suffered in the accident nearly two years back). Bill was surprised by this, as he didn’t think there were any injuries, but he contacted his insurance company and let them know he had received the statement of claim. Bill then sent the statement of claim to the insurance company and thought that they would take care of the lawsuit.

Here is where the issue of not having enough Liability Coverage for your car insurance becomes a real-world and very serious problem: the lawsuit alleging injuries requested damages of 1.5 million dollars. Bill only had $1,000,000 of liability coverage on his car insurance policy.

Bill’s insurance company contacted him right away and let him know that they would defend the lawsuit for him and pay the damages, however, ONLY up to the $1 million dollar limit he had on the policy.

Unfortunately, Bill had to hire his own lawyer, at his own expense, to defend him in the lawsuit for the difference between the $1 million dollar limit of his Liability Coverage and the $1.5 million dollar lawsuit.

The good news for Bill was that the pedestrian eventually lost the lawsuit as he was unable to prove his injuries. The bad news for Bill was that he had a $5,000 legal bill from his lawyer for defending him since the insurance company couldn’t cover the cost for him (due to the policy limit).

Bill and I discussed this lawsuit after it was over. Bill told me that his financial burden paying his legal bills and the possibility of having to pay the lawsuit was bad enough, but what was worse was the stress caused to him by not having the appropriate Liability Coverage. If Bill had a Liability Coverage in the amount of $2 million dollars, or higher, he never would have had the stress that he went through for an accident that he did nothing to cause.

The Bottom Line –

Bill’s example is the best way to explain to our customers and others, “Why do I need that much liability coverage for my car insurance?” Here at Excalibur, we don’t want what Bill went through to happen to anyone that has car Insurance in Ontario. We want to make sure you have enough protection so that your needs are taken into account and that your coverage reflects the ever-prevalent risk of litigation.

Give your broker a call today at 1-888-298-7343 to talk to your broker about reviewing your existing coverage and possibly increasing your liability coverage to avoid finding yourself in Bill’s shoes.