What Does Liability Insurance Cover? Detailed Explanation

Liability insurance coverage is vital in auto insurance.

It can save you from financial ruin if you’re at fault in an accident.

What Is Auto Liability Insurance?

Liability coverage is auto insurance coverage that’s mandatory in most states. If you’re the at-fault party in an accident, you’re liable for all the resultant damages. Liability coverage pays for the financial losses of the other parties who are involved in the accident.

What Does Liability Insurance Cover?

Liability insurance refers to coverage for injuries and vehicle damage that other people sustain in an accident that results from your negligence.

Liability insurance
Liability insurance: Photo (Insuranks)

This type of auto insurance comes in the two following forms:

Bodily Injury Liability Coverage

Bodily injury liability coverage doesn’t shield you or your vehicle.

Instead, it safeguards those injured in an accident you cause.

It covers their medical expenses, suffering, lost wages, and legal fees.

Policy terms differ, and it’s wise to purchase as much coverage as feasible.

Insufficient coverage might lead to lawsuits and asset risk.

Property Damage Liability Coverage

Property damage liability coverage pays for damage you cause to others’ property in an accident.

It doesn’t cover your vehicle; you need collision or comprehensive coverage for that.

It usually pays for repairs or replacements of vehicles, homes, structures, and objects.

Your policy and limits define what’s covered, so review your contract or consult your agent.

What Is Excluded from Liability Car Insurance?

Auto liability insurance doesn’t pay for your vehicle’s repairs post-accident; you need collision coverage.

It excludes non-accident damage like hail; comprehensive coverage handles that.

For personal injury losses after causing an accident, consider medical payment coverage.

Consult your agent for more on liability coverage or your state’s minimum insurance needs.

What Is the Coverage Limit for Auto Liability Insurance?

Auto liability coverage policies vary in bodily injury and property damage coverage limits, expressed as three numbers (e.g., 25/50/20).

First two numbers are bodily injury limits: per person and total per accident.

Third number is property damage limit.

In the given example, your insurer pays $25,000 per person for bodily injury but only up to $50,000 total for the accident.

Also, up to $20,000 is paid for property damage.

Exceeding these limits might lead to lawsuits by injured parties for the remaining costs.

When you’re at fault in an accident, remember that auto liability insurance doesn’t cover your medical expenses or your vehicle damage.

While vital, liability coverage isn’t the sole insurance needed.

Think about adding personal injury protection and collision coverage for comprehensive protection for you and your vehicle in accidents.

How Much Liability Insurance Do You Need?

As long as you meet your state’s minimum auto liability insurance requirement, you’re compliant.

For optimal coverage, factors like coverage level matter.

Generally, it’s advised to get ample liability insurance for enhanced peace of mind on and off the road.

Remember, raising coverage slightly increases premiums but can save big if at fault. Check this example:

  • 25,000/50,000/10,000: $56.25/month
  • 50,000/100,000/25,000: $60.25/month
  • 100,000/300,000/500,000: $64.50/month

These are average quotes for a 37-year-old single female driver with a 2008 Honda Accord LX, driving 12,000 to 15,000 miles yearly in ZIP code 94561, from major insurers.

How Liability Insurance Works in an Accident

Imagine causing an accident injuring three people in a vehicle. You’ve got $50,000 per-person bodily injury coverage and $100,000 per-accident limit. For the first person’s $40,000 bills, second’s $30,000, and third’s $25,000, your coverage seems enough.

Yet, if total costs hit $150,000, your insurance pays $100,000, leaving $50,000 for you. Liability coverage may fall short, making you liable for costs beyond your limits. That’s why boosting coverage beyond state minimums is wise.

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