All at risk...

I met with a client yesterday. We'll call her Mrs. Customer. I had called her earlier in the week. We take care of her homeowners insurance, but not her autos, so I called to see if we could quote her cars.

Yesterday she swung in to drop off statements from her current insurer so we could be sure to quote apples for apples. What I saw startled me.

On two of her vehicles, Mr and Mrs. customer only had liability coverage of 30/60/25! You're probably asking yourself, okay, so what?

Let's quickly take a look at what these numbers mean. The first two number are a person's liability limits for bodily injury. This means that if you injure someone with your vehicle, the insurance company(IC) will pay up to $30,000 and then you pay the rest. If you happen to injure more than one person, the IC will pay up to $60,000 and then you pay the rest. The last number represents your liability coverage for property damage you cause- the IC will pay up to $25,000 and then you pay the rest. (How much do you think the damage would come to if you total one of these new BMW's? Or even just a new Toyota?)

Good insurance companies are great at keeping there promises, but don't expect them to do more than they promised. If you cause more damage than you have coverage, you will pay the rest, either out of your assets or potentially through future wage garnishment. It can be ugly.

Imagine if your cell phone slides off the passenger seat and you reach down to grab it from the footwell. In the process, you accidently veer suddenly into oncoming traffic and strike a Honda Odyssey with a surgeon, his wife and two children in it. If you killed that surgeon in the accident, how much money do you think his spouse is going to want in return? How much would you want if you were the spouse that survived? Everything you could get, right?

.....Oh, sure it's easy to be magnanimous now, it was just a mistake, anyone could have done it, money can't bring your husband back. It's easy to think that now. Time and time again, though, these situations happen, and lawsuits follow. Big lawsuits.

So back to Mrs. Customer. She and her husband are in their 70's. They own their home and property in the country. All their vehicles are paid for and they probably have a pension or cd's that they are living on in their retirement. One could assume their assets at least exceed the $30K of coverage they have in place. Unfortunately, their current agent wasn't asking these questions. In fact, Mrs. Customer admitted to me that they hadn't seen their agent in close to 20 years!

It's important to have a third party review your coverages every 2 or 3 years. They can point out gaps in coverage and offer a different perspective on financial planning. Don't wait til the accident has happened and you're served with papers.