Liability Auto Insurance: What's Covered And What's Not

Basic auto insurance, also known as liability insurance, is a type of insurance policy that covers the minimum legal insurance requirements in most states. It includes two main types of liability insurance: personal injury and property damage. Personal injury liability insurance covers injuries that the policyholder causes to others in an auto-related accident, including hospital bills and lost wages. Property damage liability insurance covers the repair and replacement costs of damage to another person's belongings in a car accident caused by the policyholder. While specific requirements vary by state, most basic auto insurance policies consist of bodily injury liability, personal injury protection, property damage liability, collision, comprehensive, and uninsured/underinsured motorist coverage.

Bodily injury liability

It is important to understand the limits of your bodily injury liability coverage. Most policies will present these limits as a set of three numbers, such as "100/300/100." The first two numbers refer to the maximum amount your insurance will pay per person and per accident for bodily injuries, while the third number relates to property damage. For example, a policy with limits of 100/300 means that your insurance will cover up to $100,000 per person and a total of $300,000 per accident for bodily injuries.

While bodily injury liability coverage is legally required in most states, the minimum coverage limits vary. It is recommended to purchase coverage that exceeds the state-mandated minimum to ensure adequate protection. Experts generally advise carrying at least $100,000 in bodily injury liability coverage per person and $300,000 per accident to realistically address the risks associated with today's litigious environment.

Personal injury protection

PIP coverage is typically priced separately from other types of auto insurance coverage, and the policy limits and pricing can vary depending on the state and insurance provider. In some states, such as Texas, PIP insurance is not mandatory, but drivers must sign a waiver if they want to decline the coverage. Texas requires insurance companies to offer every driver at least $2,500 of PIP insurance, and drivers can usually increase their coverage to $5,000 or $10,000 if desired.

It's important to note that PIP coverage is distinct from liability insurance, which covers injuries and damages caused to another person or their property in an accident where the policyholder is at fault. Liability insurance is typically required by law in most states, while PIP coverage is optional in some states. However, it is strongly recommended to have sufficient PIP coverage to protect oneself and one's passengers in the event of an accident, regardless of who is at fault.

Property damage liability

It is important to note that property damage liability coverage only applies to damage caused to another person's property, not to your own. Additionally, each state sets its own minimum requirements for property damage liability coverage, and it is your responsibility to ensure that you have adequate coverage to protect yourself financially in the event of an accident. While the minimum coverage may be sufficient for some drivers, those who own a home or expensive items, drive in high-traffic areas, or live in an area with expensive vehicles may want to consider purchasing higher limits.

When choosing the right amount of property damage liability coverage, it is important to consider your individual circumstances and assess your potential risks. Ask yourself questions such as whether you own a home or other valuable assets, whether you frequently drive in high-traffic areas, and whether there are a significant number of luxury vehicles in your area. By carefully evaluating these factors, you can make an informed decision about the level of coverage that best suits your needs and provides you with the necessary financial protection.

Collision coverage

When deciding whether to purchase collision coverage, consider the value of your vehicle and your ability to pay for repairs or a replacement vehicle out of pocket. If your vehicle is brand new or still worth a considerable amount, collision coverage can help with expensive repairs or replacement costs. Collision coverage is also worth considering if you cannot afford to pay for repairs or a replacement vehicle out of pocket. On the other hand, if your vehicle is in storage and will not be driven for a long period, you may not need collision coverage during that time.

The cost of collision coverage varies depending on personal factors such as age, gender, marital status, and driving record, as well as details about the vehicle and location. It is typically written with a deductible that applies separately to each occurrence, with deductibles ranging from $500 to $1,500, and $500 being the most common.

Comprehensive coverage

Basic auto insurance policies typically consist of six types of coverage: bodily injury liability, personal injury protection, property damage liability, collision, comprehensive, and uninsured/underinsured motorist coverage. While comprehensive coverage is optional and not required by law in any state, it is usually mandated by lenders if you lease or finance your vehicle.

Frequently asked questions