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Comment by DominikPeters | Hacker News Reader

Does anyone know why in the US it is common to only be car liability insured up to around $200k while in Europe the standard is tens of millions? (The US maximum that I've seen possible is $2m when adding "umbrella" insurance.) This just doesn't make sense to me, especially in the face of local health care cost: what do you do if you're at fault in an accident that disables a family a four who have to spend millions in health care costs over the next several decades? (I'm even more confused because US car liability insurance is not cheaper than in Europe, despite two orders of magnitude difference in coverage.)

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The cost of suing, proving damages, and recovering the money is such that it rarely makes sense to try to recover money from individuals. 99.9% of the time, a policy limit settlement is the most you’ll recover, and that kinda disincentives insurance companies from voluntarily offering higher policy limits.

(Also I’d wager that more people have only the legal minimum liability than not, which even in CA is $5k property, $30k injury)

Is it cheaper to sue and recover money over there / do people actually expect to recover $1M from individuals? Or is it that governments require insurance companies to offer the higher limits to cover actual damages?

Thanks, this makes a lot of sense. Essentially the legal system is too broken. In Germany, the legal minimum is about €9m, but standard coverage is €50-100m. Not sure how things go regarding enforcement, but there are a couple of stories where an accident destroys a bridge etc leading to very large payouts. I guess if you get into a bad crash with a travel bus this could also lead to massive liability.

Here in Japan, car insurance with unlimited/unlimited liability for person/property is pretty basic. It is considered that why unlimited is important is because normal people isn't good to estimate how much max liability is needed. Anyway no one would abuse unlimited insurance (but may abuse within limited range) so set it unlimited won't up insurance fee much. IIRC Some insurance also offer something like 50M JPY limited plan but it just save about 2k JPY per year (YMMV). Anyway, the point of insurance is to cover very rare unpayable reparation event, so why not unlimited?

I guess insurers want to avoid being bankrupted by a single disaster, and prefer that the insured person goes bankrupt instead. Unclear what is the socially optimal policy, but I'd anyway assume if a car accident ever causes like $1B in damages, government will end up paying the bill.

It sounds like the time to reinsurance.

If health care wasn't covered publicly in Europe you'd be paying out those larger amounts more often which would cause rates to rise and then differentiation with cheaper lower capped offerings.

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