What could be a consequence of choosing a lower liability coverage limit in auto insurance?

Choosing a lower liability coverage limit in auto insurance significantly increases financial risk in the event of an accident. Liability coverage is designed to pay for damages and injuries you may cause to others in an accident where you are at fault. If your coverage limit is too low, and you are involved in an accident that results in substantial damages or medical bills exceeding your coverage limit, you will be personally responsible for paying the remaining balance out of pocket. This could lead to serious financial strain, including debt and potentially bankruptcy, if the costs are substantial.

In contrast, higher premium payments typically come with higher coverage limits, which would reduce financial risk. While lower coverage might seem appealing due to its lower cost, it can expose you to significant financial liabilities that may not be manageable in the long run. The choice of liability coverage is a crucial aspect of financial planning, underscoring the importance of balancing premium cost with adequate protection against potential losses.