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The Risk Of Litigation
The way the economy works over time sometimes catches you unawares. Go back to 1960 and take a dollar out of your pocket. In those days, that had real buying power. If you wanted the same value today, you would need seven dollars. People used to say a dollar is a dollar, except it isn't when you have inflation. So when the states were busy debating the financial responsibility bills back in the 1950's and 60's, they were all talking about big sums of money. These lawmakers wanted to make sure that, if drivers had an accident and were at fault, there was more than enough money to pay the medical expenses and the costs of repair. That's why many states made $50,000 the minimum to cover medical costs. You can judge how big by multiplying it by seven. The result was that the insurers paid out on most claims without the need to involve the courts. This suited everyone except the attorneys, of course. Claims were settled quite quickly and everyone got on with their lives.
Fast forward to today and you find a quote different state of affairs. Many states have not adjusted the mandatory minimums for liability cover to ensure ...
... the values have kept pace with inflation. Indeed, many states still have minimums of $50,000 for the first person injured in an accident. It's instructive to compare this with the amounts routinely included in homeowners policies. The lowest amounts of cover tend to be $100,000 with most policyholders opting for $300,000 or more cover. Why so much, you ask. Well the answer is the cost of medical treatment. This has been rising faster than inflation for years and, for more serious injuries, $100,000 is not going to buy a great deal of care. The other factor is the influence of the courts.
More people are now taking their claims to the courts because, in addition to recovering money spent on treatment, the victims can also recover lost pay and damages for pain and suffering. So, returning to traffic accidents, the amount likely to be awarded by the courts is now significantly more than any of the mandatory minimum amounts. Why should you care? Surely people only sue the rich?
Well, it used to be the case that plaintiffs favored claims against the rich and middle classes. That was in the days before the recession when they had to pay the costs of their attorneys to get the cases to court. They wanted a reasonable chance of getting some money out of the case. But now money is really tight, there's more pressure on people to sue. Add in the contingent fee system where attorney agree to pay the costs in return for a share in the damages and you have a very good reason to buy a lot more than the basic minimum liability cover. Indeed, you might seriously consider getting car insurance quotes for umbrella cover which can cover you up to $1 million and more. This might look extreme but, as people grow more litigious, can you afford to risk it? Car insurance is not the most expensive form of cover. It might be worth a few extra dollars a month for peace of mind.
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