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Why You May Not Have Adequate 3rd Party Coverage In Your Car Insurance Policy January 24, 2019

The term 3rd party coverage refers to a policy enhancement, one that should put the policy holder at ease. That optional coverage provides money to the covered driver that has been found at-fault for a given accident. The same option protects the driver’s assets, in the event that the defendant seeks a large compensation package.

What assets are protected?

• Equity in a home
• Money in a savings account
• Wages protected from garnishment.

Who might seek such assets?

A pedestrian, rider on a bicycle, motorcycle rider or another driver and even the passengers might seek compensation. Drivers cannot predict the size of the amount of money demanded by a plaintiff. A lawyer can see the factors that could influence the size of that award.

Factors that might influence the award’s size

• The severity of the damages sustained by the plaintiff
• To what extent was the plaintiff’s vehicle damaged?
• What was the value to the plaintiff of the present lost income?
• What was the estimated value of the plaintiff’s loss of a future earnings potential?

Erroneous assumption made by too many policy holders

Too often drivers that plan to buy a car insurance policy think that 1 million should be a sufficiently large 3rd party coverage. This mistaken assumption accepts the belief that there is little chance that the insurance-carrying driver might hit someone with a huge salary or someone with a chance at sizeable future earnings.

Such a belief reflects a willingness to trust an estimation, a guess as to any one victim’s lost future earnings. Any amount of money awarded by a court does not get determined by an estimation. It gets determined by a calculation.

Lawyers know that 1 million might not be enough. An economist examines the facts and calculates a plaintiff’s lost future earnings. That calculation often comes to far more than the estimated amount. That is why lawyers normally encourage any driver to invest in as much as 2 million in 3rd party coverage.

Too little coverage puts the driver’s assets at risk. A loss of something of value, due to the absence of suitable coverage would seem to make all payments for the 1-million-dollar coverage seem like a fruitless expense. What had the policy holder bought with those payments? Not a single dollar that was paid to the insurance company had protected the driver’s assets.

True, a defendant could seek out and hire a lawyer, in order to fight the demands of the plaintiff. Yet that would add to the amount of money that the defendant must invest in trying to challenge a court’s decision. Because personal injury lawyers in St. Albert urge the buying of 2 million in coverage, it seems doubtful that a lawyer’s skills help to guarantee the winning of such a case.