Ykhjuy

I read on my "Evidence of Liability Insurance card" issued by Geico in California, US:

What to do at the time of an accident: […] Do not reveal the limits of your liability coverage to anyone.

Why does Geico ask me not to reveal the limits of my liability coverage in case of a car accident, and should I follow that advice?

Negotiation 101, never be the first to say a number.

You tell them you have a $300,000 limit and magically they want $300,000. Alternatively, they may just assume you carry the minimum.

It isn't just GEICO that tells you this, every US car insurance company instructs their customers to not mention the amount of coverage.

Your job is not to negotiate. Your job is to collect the specified information and to hand the claim process over to the insurance company. That is also why they tell you not to admit fault.

When you start discussing the amount of coverage you have, then you are starting the process that the insurance company doesn't want you involved in. Telling them the maximum that your insurance can pay, or telling them that you only have the state mandated minimum doesn't make the job of the insurance company any easier.

The limits of your coverage are completely irrelevant to anything you might do in a situation where your liability coverage is in play. More directly, there is nothing at all for you to gain from providing this information. Another way to look at the question is "why would you want to reveal this information?".

There probably isn't much downside to it for you, personally. Your insurer will be on the hook for any negative consequences (like inflated settlement amounts, at the margins), but your policy isn't going to retroactively change or anything. But the insurer will still want to protect its own interests to the maximum possible extent.

Your contract almost certainly establishes that every element of the settlement, and negotiations around it, will be handled by your insurer. You blurting out information in this situation wouldn't be much better than you interrupting your own lawyer in the courtroom during arguments in a trial.

As a few examples:

• Someone might see your volunteering that information as an admission
  of guilt, giving them much better leverage in negotiations than if
  you'd simply not said anything.


• The payment sought might become higher due to knowing how much money
  is "available", as per other answers here.


• It's not that hard to rack up "valid" medical charges, meaning not
  obviously fraudulent, like additional MRI scans because the ones
  already done aren't clear enough (allegedly). This is somewhat risky (the claim may not cover those bills anyways), but it is less risky if the potential insurance payout has a higher ceiling.


• The other party (or parties) might believe that they are entitled to
  that amount of money, not for any rational reason but because it's the number they heard, and then becomes hard to deal with within and
  outside of the insurance process.


• It might simply make the settlement process longer and more tedious,
  causing the insurer's money to be burned in extra administrative and
  bureaucratic costs to no additional benefit to anyone. Consider the case of identifying which medical bills were reasonable and which were opportunistically grasping for more cash-- that audit isn't free.


• Revealing information about your policy might suggest information
  about your personal financial situation, making you a target for
  additional civil litigations (whether they are frivolous or not,
  you'll have to dedicate time, energy, and money to responding).

I disagree with the given answer. First, in negotiations, it's often advantageous to state your number first. Doing so takes advantage of a cognitive bias called anchoring. If you're able to (credibly) state your preferred price (or salary) or whatever first, you'll anchor negotiations around that preferred price of yours.

Second, doctors, lawyers, whoever else, are not going to let you "fudge" your injuries up to a certain amount. That would be insurance fraud. Arguably, you might choose more premium services when possible (for repairs or hospitals, for example), but that isn't going to "magically" get you up to the damage cap.

As for what I think the "more right" answer is, this is about settlements. If the other party has claims they have incurred, lets say, $100,000 in damages, your company may try to settle for less than $100,000. If the counterparty knows that you are, in fact, covered up to $300,000, they may refuse, claiming they should get the full $100,000 they ask for. If, however, the other party doesn't have that knowledge, the settlement offer might seem credibly capped by a coverage amount, and Geico would pay less than it otherwise might.