When purchasing liability insurance, you may see the numbers 50/100/50. These figures are critical as they define the coverage limits of your insurance policy. They represent the highest amount your insurer will pay in case of an accident.
This article will explain what you need to know about the 50/100/50 formula in liability insurance coverage. Let’s begin.
Breaking Down the 50/100/50 Formula
The first number in the 50/100/50 formula refers to $50,000 per person for bodily injury. This is the most your insurer will pay for injuries you cause to a single individual in an accident. Medical costs have risen significantly in recent years, with average hospital stays exceeding $10,000 per day in some states.
Depending on the severity of the injury, this amount might seem like a lot or a little. For example, if you were to cause a severe accident and a person needed surgery, hospitalization, and follow-up treatment, their medical bills could easily exceed $50,000. In that case, you could be responsible for any costs beyond the $50,000 your insurer must pay.
The second number in the 50/100/50 formula is $100,000 per accident for bodily injury. This refers to the maximum amount your insurance will pay for all injuries in a single accident, no matter how many people are involved. This cap is crucial, especially if you are involved in an accident that injures multiple people.
For instance, if three people in another vehicle were seriously hurt, their medical bills combined could exceed $100,000. The insurance would cover up to that amount, but if their total medical costs go beyond the $100,000 limit, you could be personally liable for the rest.
The third number in the formula is $50,000 for property damage. This is the amount your insurance will pay for damage you cause to someone else’s property in an accident. Property damage most commonly refers to vehicle damage, but it can also include damage to fences, buildings, or public property, such as traffic signs.
A report from the Kelley Blue Book states that the average price of a new car in the United States surpassed $48,000 in 2023, meaning the $50,000 limit might cover replacing a single vehicle. However, if multiple cars are involved in the accident or if you damage expensive property, this amount could quickly fall short.
Why the 50/100/50 Limits Matter
While the 50/100/50 limits meet the legal requirements required in many states, they may not offer enough protection in more severe accidents. For instance, serious accidents with multiple injuries or damage to luxury vehicles could lead to costs that exceed these limits. If your insurance policy can’t cover the total damages, the injured parties might take legal action against you to recover the remaining balance.
Depending on the value of the claim, this could result in the seizure of personal assets or even wage garnishment. Costs can rise exponentially for accidents involving severe damage, especially involving multiple vehicles. Moreover, with inflation driving up medical expenses, injury claims are also becoming more costly.
Is 50/100/50 Enough?
While the 50/100/50 formula meets the minimum legal requirements in many areas, you should carefully consider if it’s enough for your financial situation. If you have significant assets, such as a home, savings, or investments, a lawsuit that exceeds your insurance coverage could put you at risk.
Many insurance experts recommend carrying higher liability limits to ensure better protection. Opting for a 100/300/100 or even a 250/500/100 policy can provide more comprehensive coverage in a severe accident.
In conclusion, the 50/100/50 formula in liability insurance coverage provides an essential layer of protection for drivers in case of accidents. While it meets the minimum legal requirements in many states, evaluating your personal needs and risks is crucial to ensuring you’re fully covered.