Auto Insurance Sale  And High Car Liability Insurance Limits: Two Different Philosophies

When Size Does Not Matter, Height Does


by Ed Sneineh
Charted Financial Consultant

Insurance marketers and financial advisors are not in accord about the weight that must to be put on limits of liability in car insurance contracts. Marketers like to emphasize the features of price and the insurer's ranking, while financial advisors like to focus on the importance of liability limits initially, then company ranking next, and perhaps price at a final phase.

Although financial advisors and car insurance marketers have the universal goals of maximizing their incomes while performing their services, the scale of their business is much dissimilar. Car insurance marketers make their income by selling as many contract as they can do. The marketer does his best to make as many policy sales as possible, hence making small amount of money on too many policies sold. Financial planners work differently as they try to make larger money from each of the few number of clients they have. Selling a car insurance policy is not the principal worry of a financial advisor, but for her or him auto insurance is one of the essential focus of the financial planning course.

Car insurance producers look at car insurance as a way to protect the client  when there is a loss to car itself, in the occasion of theft, fire or another loss, in addition to the fact that insurance is the law. Financial advisors  look at car insurance as a vital part of their clients risk management process. To the financial advisor a car policy is not to restore the car in the event of loss, but is mostly about shielding the assets and capital of the insured, especially against possible legal proceedings.A number of car insurance marketers would even recommend to reduce liability insurance as a method to save money. No sound financial advisor will ever make such a recommendation.  No way!


When does height matter?

How high your liability limits should be  is the key concern when you buy auto insurance. Perhaps you need only the minimum liability limits mandated by the states in situations where (1) you looked  for higher limits and  the cost was very prohibitive, (2) your current assets / capital is too little to expose you to further lawsuits in the event of at fault car accident. (3) you are a high risk person where no other company wants to insure you except those that insure only at the minimum limits. But, if you have certain amounts of assets and capital, or is expected to have considerable assets or capital, then you must be concerned about the height of your liability limits.

What if you are not wealthy with plenty of assets? For people with modest or no wealth, the height of liability limits should be much of a worry for them. In Illinois and many other states, liability insurance includes certain coverages to pay for your bodily injuries in situations when you get stricken by a vehicle that is legally uninsured, or, in other instances, is insured but the insurance paid on that vehicle was not enough to cover your bodily injuries. According to the Insurance Research Council, approximately 15% to 17% all drivers in the United States are uninsured. Coverages for Uninsured Motorist (UM) and Underinsured Motorist (UIM) vary from state to state with regard to their obligatory status and limit amounts. In Illinois UM is compulsory at the limits of $20,000 for bodily injury per person and $40,000 for bodily injury per accident. Underinsured motorists coverage is not mandatory in Illinois but insurance companies must offer that coverage to clients for policies issued with liability over the state limits. Clients can still decline to have higher uninsured/ underinsured motorists but it has to be in writing. As you can see, your liability only policy gives protection for your bodily injuries, and making certain that you have high limits on both liability, UM and UIM can have incredible result on you and your family.
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