Auto Insurance - Knowing Your Suability Factor

From Insurance for Dummies by Jack Hungelmann

I define suability factor (SF) as the probability of an injured party suing you for large sums — often for more than the amount of auto insurance you’re carrying. For that to happen, you must be worth something, either currently or in the future. Why? Because if there’s nothing to go after, no pot of gold at the end of the rainbow, many attorneys won’t take the case and help an injured party sue you. Your SF is influenced by several elements. The table below shows four of those.

Your Suability Factor

SF Elements                       Examples of People with a High Suability Factor

Current income                Athlete, doctor, investment banker, lawyer, executive

Current assets                  Successful retiree with high net worth

Future income                  Medical intern, law student, MBA student

Future assets                    Anyone with a potential inheritance

People with high current incomes or assets usually are aware of their suability. But people with little current income or assets often overlook their future income or asset potential and the effect it has on their current suability.

The bottom line is that if you have one or more of these four elements contributing to a high SF, you are more apt to be sued for amounts greater than your auto insurance coverage and you need higher liability limits on all your insurance policies. An added advantage of higher liability limits is that the closer your liability limit comes to the economic value of the injury you cause, the greater the likelihood that the injured party will settle for your insurance policy limit and not pursue you — personally — beyond that. Another variable in choosing a liability limit for many people is their sense of moral responsibility. For example, a person who is not very sueable may buy a higher liability limit than they would otherwise need, to make sure that any fellow human being they injure is provided for financially. If you are one of these people, my hat goes off to you in admiration.

You may be wondering how much it costs to raise your liability coverage — well, it costs very little. I invite you to call your agent and find out for yourself. You’ll be amazed! (Don’t forget to raise all your liability limits on your other personal policies to the same limit as your car insurance.) The table below shows an example of fairly typical costs involved in raising liability coverage from $100,000 for two cars, a home, a cabin, and a boat. The numbers may vary depending on the insurance company and the circumstances of the insured.

Cost of Raising Liability Limits from $100,000

New Liability Limit                            Additional Annual Premium

$300,000                                                             $70

$500,000                                                             $120

$1.5 million                                                        $220

$2.5 million                                                         $280

Each additional $ million                                 $60

It is important to note that coverage beyond $500,000 is sold in $1 million increments under a catastrophic excess policy commonly referred to as an Umbrella policy. See Chapter 10 for more on Umbrella policies.

When you look at what you’re spending for the first $100,000 of coverage, you see that you can tremendously increase your catastrophic lawsuit coverage (not to mention your peace of mind) for just a small additional amount. Additional liability coverage is the best value in the insurance business.