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In the last couple of years, our exposure to lawsuits while driving a car has grown due to the changes in our state’s No-Fault insurance — yet many of us still have the same levels of auto liability coverage we had in 2019.

When we ask how much liability insurance someone wants, we get a response designed to quickly get past the question, such as “ohhh, whatever I have now” or “whatever you think is best” or “the same as my brother-in-law.”  The liability question merits a deeper discussion, because lawsuits are the biggest threat to your financial future!

Liability coverage is often called “lawsuit protection” and it is purchased in various limits – usually starting from $250,000 and higher.  Dollar-for-dollar, liability insurance is one of the least expensive coverages on the policy.  Since No-Fault Reform, the State of Michigan has created “recommended” liability limits of $250,000 per person and $500,000 per accident and they’ve more than doubled the old minimum required limits!

Why would the state do this?  Because they know their No-Fault changes increase the likelihood of being sued.  If you’re involved in an auto accident you could be sued by everyone involved, starting with passengers who are non-resident family members and don’t have any or enough medical coverage.  If you’re even 10% at fault, you could be sued for 10% of a huge figure.  Before No-fault Reform you had to be 51% or more at fault.  It’s now like Mrs. Michael is the judge (she missed her calling ‘cuz she’d be like a German Judge Judy).  I could easily find myself in hot water even if I was only 10% at fault.  Of course, her score card might look different from mine!

Do you know what happens when you run out of liability coverage?  The insurance company writes a check for the amount of coverage you purchased, their attorney goes back to their office, and you’re on your own for legal defense costs and the remaining awarded damages.  Not a good spot to be in.

How much liability insurance should you get?  My recommendation is to explore more than the “entry levels” of liability the State of Michigan recommends… and then let’s chat about an Umbrella Policy as well!   Contact your insurance agent and have a good conversation about all of this!