Caleb Meriwether, Haven Insurance Partners, visits with Dan Reaves, host of ‘The Dan Reaves Show,’ today, and each Wednesday at 3:30 p.m., to discuss all things insurance.
How Much Liability Coverage Do I Need?
Determining how much liability coverage you need can be challenging, particularly given the wide range of potential exposures and the financial risks involved. Liability exposure refers to situations in which you might be legally responsible for causing injury, damage, or loss to another party. Common scenarios include auto accidents, slip-and-fall incidents at your home or business, or claims of professional negligence.
In Tennessee, as in many states, insurance policies carry specific liability limits that represent the maximum amount your insurer will pay for claims. For example, a standard auto insurance policy might have liability limits represented as 100/300/100, meaning $100,000 bodily injury per person, $300,000 bodily injury per accident, and $100,000 for property damage per accident. However, in serious incidents, these limits can quickly be exceeded, potentially leaving you financially exposed.
To address this exposure, many individuals and businesses opt for umbrella policies. Umbrella insurance provides additional liability coverage above and beyond the limits of your primary auto, home, or commercial policies. If you’re involved in an accident causing damages of $750,000, and your auto insurance limit is $300,000, your umbrella policy would cover the additional $450,000. Umbrella policies typically begin at $1 million in coverage and offer a cost-effective way to ensure extensive protection.
When evaluating your liability coverage needs in Tennessee, it’s crucial to understand the state’s statutory cap on non-economic damages. Tennessee law caps non-economic damages—such as pain, suffering, and emotional distress—at $750,000 per occurrence for most cases, and up to $1 million for catastrophic cases. However, economic damages like medical bills, lost wages, rehabilitation costs, and property damage have no statutory limits. These economic damages often exceed standard liability coverage limits.
The existence of damage caps in Tennessee doesn’t eliminate the need for higher liability limits. Instead, it helps clarify your risk exposure. Since economic damages can still be significant, having substantial liability protection is essential to safeguard your financial stability and assets.
Consider your personal or business assets, income, and potential risks when determining appropriate liability coverage. High-net-worth individuals and businesses with significant exposure should ensure their coverage, including umbrella policies, adequately exceeds their potential financial risks.
Ultimately, while Tennessee’s cap on non-economic damages offers some degree of protection, significant risks remain from uncapped economic damages. It’s important to choose higher liability limits and an umbrella policy tailored specifically to your financial situation and risk exposure.
So, how much do you need? It will vary from individual to individual and business to business. As always, find an agent you trust and move forward.
