Deciphering the 20/40/10 Rule | Paradiso Insurance (2024)

You often hear about certain ‘rules of thumb’ for a wide variety of subject matters, especially those that deal with personal finance and/or living situations. For example, I’ve heard the2:1 ratio when deciding a safe price for a car or home. If you’re not aware of this ratio it’s simple: if you make $100,000, you can afford a $200,000 home,and if you make $50,000, you can finance a car loan for $25,000.

In any event though, thisisan insurance blog, so we’re going to discuss the oft-heard numbers”20/40/10” when discussingCT auto insurance.Your agent may mention that the minimum required limits are”20/40/10″. Let’s take a closer look at what this means.

“20” is the limit that your carrier will pay for bodily injury to one person per accident. This means that if you hurt somebody with your vehicle, your insurance will pay that person$20,000 for their medical bills. “40” is the limit that your carrier will pay for all people injured in an accident. This number is a little tricky. Let’s say you run a red light and smash into a sedan full of people. If you injure only two people, they both will receive $20,000(with 20/40/10 limits). However, if you injure three people, they must split the maximum limit of $40,000 (meaning each person will receive only $13,333).The third number denotes the limit of liability on property.

This means that if you damage somebody’s property, your carrier will pay up to$10,000. As you can see, these limits are very low. We highlyrecommend limits in excess of 100/300/100. Apersonal umbrellapolicy will also protect you in case you are sued.Visit ourwebsiteor call us today at 860.684.5270 to update your coverage!