What is Liability Insurance and why do I need it?
I’m a safe driver. I don’t do risky things. Someone I know would never sue me.
Sound like something you’d say? When it comes to truly terrible events, many people have an “It can’t happen to me” mentality. This belief is not only false—it’s also dangerous.
“Believe me when I say a catastrophic event can happen to anyone,” says Scott Brown, a supervisor in the Erie Insurance Claims Department with 38 years of experience. “Most of the serious cases we see involve simple negligence, not recklessness.”
A few examples
Many of the catastrophic cases Scott has seen over the years involve cars. Surprisingly, most do not involve alcohol or drugs.
“Everybody believes they are superior drivers, but we all make mistakes on the road,” says Scott. “Anything from a momentary distraction to poor weather can contribute to an accident.”
Accidents can have major repercussions if you injure someone else. The same applies if you hit an expensive vehicle like a brand-new luxury car or a commercial truck.
Serious accidents also happen at home due to simple negligence. Some of the most common cases Scott has seen include pool drownings, burns and falls.
Considering the consequences
Beyond the emotional toll serious accidents have on you, there’s also a serious financial impact.
If you injure someone or damage their property, a court could very well hold you liable for the costs a victim incurred. Those costs can soar into the millions quickly, especially if a person needs extensive medical treatment or long-term physical therapy.
“The general rise in healthcare costs, along with the fact that our society is growing more litigious, is contributing to a rise in medical claim costs,” he says.
An accident that causes a serious injury to someone else could easily exceed an average person’s auto liability insurance limits. If your limits are exhausted, personal assets like your wages and savings could be at risk. In some states, even your retirement savings and home could be up for grabs.
How to protect yourself
Basic liability insurance limits on your auto and home are typically $100,000 or $300.000. That’s enough for many situations, but not all. In fact, it won’t even cover the average jury award for vehicular negligence verdicts. (That currently stands at $531,858—and half of all awards are higher than that.)
In those cases, a Personal Catastrophe Liability (PCL) policy could be a lifesaver. A PCL policy, also commonly known as an umbrella policy, provides an extra layer of liability protection over and above both your auto and homeowners policies. It covers you (or a covered family member) if you’re sued because of an accident.
Beyond protecting hard-earned assets, PCL also helps ensure you do the right thing when the wrong thing happens. Unfortunate situations sometimes happen. By having the resources to help compensate someone for their injuries and inconvenience, you’ll have the means to help them.
Not just for millionaires
Many people mistakenly believe that only high‑net‑worth individuals need a PCL policy.
In reality, liability risks are everywhere, and they have the potential to financially derail people of modest means as well as multimillionaires. (Experts recommend you cover at least one to two times your exposed net worth.)
Insurance certainly can’t stop bad things from happening. But it can help ensure that an accident doesn’t leave you, your family and possibly even a victim high and dry. A professional like an Erie Insurance Agent can tell you more about the protection and peace of mind the right liability insurance offers.