Understanding Auto Insurance Liability Limits: Are You Covered Enough?

Liability car insurance is a type of coverage that provides financial protection if you're found legally responsible for an accident that results in injury, death, or property damage. Liability insurance covers the costs of other people's expenses when you cause an accident, including medical costs and property damage. It does not cover your own expenses or repairs to your car. Nearly every state in the US requires drivers to have a minimum amount of liability coverage, though the amount varies from state to state. The cost of liability insurance depends on factors such as the limits you select, your driving record, your age, and the value of your vehicle. It is recommended to have enough liability insurance to cover your net worth, including your home and bank accounts, to protect your assets in case of a lawsuit.

Bodily injury liability coverage

The limits of your Bodily Injury Liability Coverage will be displayed as the first two numbers in a series of three. For example, in the series "25/50/25", the first number ("25") is the maximum your insurance will pay for injuries to a single person after an accident, and the second number ("50") is the maximum that will be paid for injuries to all those injured in a single accident. The third number relates to Property Damage Liability Coverage.

Property damage liability coverage

The coverage limit for Property Damage Liability is usually set per accident, and it's important to ensure you have adequate coverage. If the cost of damages exceeds your coverage limit, you will be responsible for the remaining amount. Therefore, it's advisable to consider factors such as the value of your home and possessions, the presence of expensive vehicles in your area, and whether you frequently drive in high-traffic areas when selecting your coverage limit.

In the state of Georgia, for example, the minimum limit for Property Damage Liability Insurance is $25,000 per incident. However, each state sets its own requirements, and it's recommended to check the specific regulations in your state.

You can also opt for a higher limit or add an umbrella insurance policy for additional coverage if needed. This is particularly relevant if you own a home or other valuable assets, as it provides extra protection in the event of an accident.

Uninsured/underinsured motorist coverage

Uninsured motorist coverage comes into effect when the other driver involved in the accident has no auto insurance at all. This coverage will protect you by paying for your injuries, your passengers' injuries, and any damage to your vehicle. In the case of a hit-and-run accident, you can file a claim against your uninsured motorist coverage. Additionally, if the insurance company of the at-fault driver denies coverage, such as in cases where the vehicle was stolen, you can also rely on your uninsured motorist coverage.

Underinsured motorist coverage, on the other hand, applies when the at-fault driver does not have adequate insurance to cover all your damages. This type of coverage ensures that you are not left paying out of pocket for medical bills or vehicle repairs. It covers both bodily injuries and property damage, similar to uninsured motorist coverage.

When considering how much uninsured/underinsured motorist coverage to purchase, it is generally recommended to match the bodily injury portion with the amount of your liability coverage. For property damage coverage, selecting a limit that mirrors the value of your vehicle is often a suitable choice.

It's worth noting that uninsured/underinsured motorist coverage may be mandatory in your state, with around half of the states requiring at least one of these coverages. Even if it's not required in your state, opting for this coverage provides valuable protection against financial risks associated with accidents involving uninsured or underinsured drivers.

Personal injury protection (PIP)

Auto insurance requirements and features differ from state to state, and PIP coverage is available primarily in no-fault states. In a no-fault state, if a policyholder is injured in a car crash, their policy pays for their medical care, regardless of who caused the accident. Policyholders with PIP coverage can receive benefits even if the other driver doesn't have insurance.

PIP pays for medical expenses for people in the policyholder's vehicle, regardless of who causes the accident. PIP coverage also often provides payments for lost income, childcare, and funeral expenses related to the accident. Some no-fault states offer medical payments coverage, but it typically has low limits and does not pay for these other costs.

PIP auto insurance is required in 15 states and Puerto Rico, including Delaware, Florida, Hawaii, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania, Utah, and Puerto Rico. Minimum coverage requirements are set by state governments and can vary, while maximums are set by insurance companies and are usually no more than $25,000.

For example, in New York, the basic No-Fault coverage provides up to $50,000 per person for economic losses, including medical/health expenses, lost earnings, and other reasonable and necessary expenses related to injuries sustained in an accident. This coverage is designed to restore individuals hurt in auto accidents to health and productivity as quickly as possible.

Comprehensive coverage

The limit of your comprehensive coverage will depend on the actual cash value of your car. You will also need to pay a deductible, which is the amount you agree to pay before the insurance company starts paying for damages. A higher deductible will lower your insurance costs, while a lower deductible will increase them.

Frequently asked questions