Why You Shouldn’t Lower Your Car Insurance Liability Limits

Find out why cheaper coverage isn’t always better for your budget.

  • Individual Blog
  • Why You Shouldn’t Lower Your Car Insurance Liability Limits

Why You Shouldn’t Lower Your Car Insurance Liability Limits

Posted by Pekin Insurance on Feb 26, 2019

4 min read

Find out why cheaper coverage isn’t always better for your budget.


You make sacrifices to hit your financial goals. You hold on to coupons and take staycations because you know a penny saved is a penny earned. A dollar doesn’t go as far as it once did, so you might think about changing your car insurance coverage to save money.

You should read this entire blog post to see why you shouldn’t lower your car insurance liability limits.


What Liability Does

Car insurance liability coverage kicks in when you’re found legally responsible for an automotive accident, and it helps pay for damages done to the parties injured or affected by the accident.

Your liability coverage includes two parts:

  • Bodily injury
  • Property damage


Bodily Injury

Bodily injury liability starts working when you injure someone in an accident.

Bodily injury helps pay for:

  • The injured parties’ medical expenses
  • The injured parties’ lost wages
  • Legal fees if you are sued

There are two kinds of bodily injury coverage limits:

  • Per person limit: This is the maximum amount the coverage will pay if a single person is hurt in an accident.
  • Per accident limit: This is the maximum amount the coverage will pay if more than one person is hurt in an accident.



Property Damage

If you’re legally responsible for an accident, property damage liability covers the cost of:

  • Vehicle repairs
  • Legal fees stemming from property damage
  • Lost income if damaged property is needed for business purposes
  • Repairs for buildings, mailboxes, fences, and more


Policy Limits

You’ll often see car insurance liability limits written like this: 25/50/20 or $25,000/$50,000/$20,000. 

Here’s a more detailed look at these liability limits:

  • $25,000 bodily injury liability per person
  • $50,000 bodily injury per accident
  • $20,000 property damage per accident

With these liability limits, insurance would pay up to $25,000 if you cause an accident where a single person is hurt (with some exclusions applying, depending on the policy). Insurance would pay up to $50,000 in an accident you cause where more than one person is hurt, and the coverage would cover up to $20,000 of property damage.



Lower Liability Limits = Higher Financial Risk

When you think about your car insurance liability limits, consider how much you want to prepare for worst-case scenarios. You pay for damages with your own money when you don’t have enough coverage.

In another blog post, we discuss the main reasons for car insurance rates increasing:

These are the same reasons why you should reconsider low liability limits. Using the 25/50/20 policy scenario, we’ll show you why cheaper isn’t always better when it comes to car insurance.

  • The average new vehicle costs about $35,000. A $20,000 property damage limit probably won’t cover the costs if you cause an accident that totals another driver’s new vehicle.
  • In 2010, the National Highway Traffic Safety Administration (NHTSA) estimated that the average auto fatality costs an average of $1.4 million over a lifetime, and a critical injury from a car accident costs an average of $1 million over a lifetime. As we mentioned, the cost of medical services has increased 12% since 2012, and low bodily damage limits wouldn’t come close to covering these amounts.

Unfortunately, we see claims where new vehicles get totaled, drivers and passengers sustain serious injuries, and lives are lost.


Are You Distracted?

Do you think of yourself as a careful driver who takes every precaution to avoid accidents? You might use this as a justification for having low car insurance liability limits.
Have you ever driven while:

  • Struggling to stay awake?
  • Talking to someone?
  • Recovering from a bad day at work?
  • Eating or drinking?
  • Using your cell phone?


If you answered “yes” to any of the questions above, then you’ve driven while distracted. According to the NHTSA, distracting driving led to:

  • 3,450 fatalities in 2016 (the most recent year with available data)
  • 391,000 injuries in 2015 (the most recent year with available data)


Forces Beyond Your Control

Sometimes, nature contributes to accidents caused by:

  • Hydroplaning
  • Sliding on ice
  • Losing visibility in fog
  • Struggling to steer in strong winds


Let the Umbrella Protect You
An umbrella policy is designed to give you extra liability coverage beyond your regular limits.  In the case of car insurance, an umbrella policy adds extra bodily injury and property damage coverage.  

Medical bills, vehicle repairs, and legal fees add up quickly, especially when you can be sued for mental pain and suffering if you cause an accident.

An umbrella policy is especially useful when you have a teen driver on your policy. According to the Centers for Disease Control and Prevention (CDC), teenagers are more likely to get in motor vehicle crashes than any other age group.


Better Ways to Save

To save on your car insurance policy, see if you qualify for Pekin Insurance discounts such as:

  • Auto/Home
  • Anti-Theft Device
  • Multi-Car
  • Good Student
  • Paid-In-Full