Auto Insurance And Personal Liability: Understanding The Coverage Gaps

Liability car insurance covers the costs of damage and injuries caused by the policyholder in a motor vehicle accident. It is a legal requirement in most states and typically includes two types of coverage: bodily injury liability protection and property damage liability protection. The former covers the medical expenses of the other party, including lost wages and legal fees if the injured party files a lawsuit, while the latter covers repairs to the other party's vehicle or property. However, liability insurance does not cover the policyholder's own injuries or vehicular damage, which requires separate coverage.

Bodily injury liability coverage

The coverage limits for bodily injury liability insurance vary by state and are typically split into per-person and per-accident limits. The per-person limit applies to each individual injured in an accident, while the per-accident limit applies when multiple people are injured in a single accident. For example, a policy might have a $25,000 per-person limit and a $50,000 per-accident limit. These limits can be increased to provide additional protection, but the cost of the policy will also increase.

It is important to note that bodily injury liability coverage does not pay for the policyholder's own medical expenses or car repairs. To cover these costs, additional types of insurance, such as personal injury protection or health insurance, and collision insurance, would be needed.

When determining how much bodily injury liability coverage is needed, it is recommended to consider one's net worth. This includes the value of all cash, investments, and assets, minus any debt. Having enough liability coverage to protect one's assets in the event of a lawsuit is essential.

Property damage liability coverage

Most states require drivers to carry a minimum amount of property damage liability coverage, but the specific requirements vary by state. It is important to review the requirements for your state and consider your own circumstances when choosing your coverage limits. Factors to consider include whether you own a home or other valuable items, whether you drive in high-traffic areas, and whether there are many expensive vehicles in your area. You may also want to consider adding an umbrella insurance policy, which can provide additional coverage on top of your normal car insurance.

Legal costs and lawsuits

Liability car insurance covers legal costs and lawsuits if you are sued following a car accident. This includes legal defence costs and any judgments or settlements arising from a lawsuit. Liability insurance covers legal costs and lawsuits in the event of bodily injury to another person or property damage.

Bodily injury liability coverage includes payment for medical bills, pain and suffering, lost wages, and funeral costs. It also covers legal costs if the injured party files a lawsuit. Property damage liability coverage includes payment for damage to other people's property, such as cars, fences, buildings, and government infrastructure. It may also cover other people's personal belongings and a rental car for the other driver.

Liability insurance has coverage limits, which is the maximum amount that your insurer will pay out for bodily injury and/or property damage to others if you are at fault in a car accident. These limits are typically shown as a series of three numbers, with the first two numbers representing bodily injury coverage per person and per accident, and the third number representing property damage coverage per accident. For example, 25/50/25 means $25,000 of bodily injury coverage per person, $50,000 of bodily injury coverage per accident, and $25,000 of property damage coverage per accident.

It is important to note that liability insurance has its limitations and does not cover everything. For example, it does not cover repairs to your own vehicle or replacement costs if your car is stolen. To cover these costs, you would need additional types of insurance, such as collision insurance or comprehensive insurance.

Minimum liability coverage

The minimum liability insurance you must carry is based on your state's laws. Failing to carry the minimum liability insurance required by your state can lead to expensive fines, and you could be personally liable if you cause an accident.

Minimum liability insurance requirements are usually listed as three numbers. The first number refers to the bodily injury liability limit per person. The second number refers to the bodily injury liability limit per accident. The third number refers to your total property damage coverage. These limits are the maximum that your insurance company will pay out. It may be listed as 25/50/20 or $25,000/$50,000/$25,000.

For example, the minimum liability insurance requirements in Alabama are $25,000 (per person), $50,000 (per accident), and $25,000 property damages. In Alaska, the requirements are $50,000 (per person), $100,000 (per accident), and $25,000 property damages.

It is important to note that these are the state minimum requirements. Depending on the value of your vehicle, you may want or need additional coverage.

Liability insurance includes bodily injury liability coverage and property damage liability coverage. Bodily injury liability coverage covers other people's physical damages in an accident. Property damage liability coverage covers damages to the other driver's property.

Liability car insurance pays for other people's expenses if you cause an accident. It won't pay for your own medical bills or car repairs.

Nearly every state requires at least some liability coverage (or proof you have enough cash on the side to pay for damages yourself). The only exceptions are rural parts of Alaska without requirements and Virginia, where residents can waive liability coverage if they pay the state $500 annually.

Full coverage insurance

While the term "full coverage insurance" is often used, there is no actual policy by that name. Instead, it is a colloquialism for a combination of liability, comprehensive, and collision coverage in an auto insurance policy.

Bodily injury liability protection covers the medical expenses of the other party, and may also cover lost wages and legal fees if the injured party files a lawsuit. Property damage liability protection covers the cost of repairs to the other party's vehicle, as well as other property damaged in the accident, such as fences, buildings, and telephone poles.

In addition to liability insurance, full coverage insurance also includes comprehensive and collision coverage, which help pay for damage to the policyholder's car in most types of accidents. Comprehensive coverage pays for damage to the car that is not related to driving, such as weather damage, vandalism, or hitting animals. Collision coverage pays for damage to the car after a crash with another vehicle or structure, regardless of who is at fault.

Frequently asked questions