Hidden Gaps in Auto Insurance Many Drivers Miss

When most people buy car insurance, they usually get a few quotes, pick a familiar company, and trust the agent’s recommendation.  Unfortunately, that can leave families exposed to major financial risk. Here are a few gaps that I’ve seen routinely come up with clients over the years.

Bodily Injury Liability

Liability coverage is what protects you financially if you cause an accident that injures someone.  Most people by default carry the state minimums because the agent selling the policy is often trying to be as competitive on price as possible.  Those state minimums are usually $50,000-$100,000 for bodily injury. Those numbers don’t stretch very far if you cause a serious injury. I have a friend who is also an advisor who had a client rear-end a surgeon a few years back. He couldn’t work for a period of time and the lawsuit for lost wages was massive.

A general rule of thumb is to match your liability coverage to your net worth (or higher). For many families, $250,000/$500,000 in bodily injury is a more appropriate baseline. For most of my clients, an additional umbrella policy (see below) can add extra protection for relatively little cost. 

Property Damage Coverage 

Not all cars are created equal. It’s easy to overlook property damage limits. Many policies default to $25,000 or $50,000, which is fine for an older sedan, but potentially disastrous if you total a luxury SUV or cause a multi-car accident. 

Today’s vehicles are packed with sensors, cameras, and computer systems that make even minor fender-benders surprisingly expensive. A single high-end EV or pickup can push repair costs beyond $50,000. If your limit stops at $25,000, you could personally owe the remainder. I often recommend raising these to $100,000.  

Increasing this limit typically costs only a few dollars a month, but it can save you from tens of thousands in out-of-pocket risk. 

Umbrella Policies 

If your liability limit tops out at $250,000/$500,000, an umbrella policy adds an extra $1 million or more of coverage on top, often for less than $200 a year. 

This coverage extends beyond your auto policy to cover things like injuries on your property, defamation, or other personal liability exposures. Again, matching the amount to your net worth is a good rule of thumb, although having an agent look at all your assets and income and provide coverage specific to you is wise.  

Auto insurance shouldn’t be a “set it and forget it” purchase. It’s a core part of your financial safety net and worth reviewing every few years or whenever your life changes. 

Happy Planning, 

Alex 

This blog post is not advice. Please read disclaimers.