Understanding Liability Auto Insurance: What You Need To Know

Liability auto insurance is a type of insurance coverage that helps to protect you financially in the event that you are responsible for someone else's injuries or property damage in a vehicle accident. This type of insurance is required by most states in order to legally drive a vehicle and typically consists of two types of coverage: property damage liability and bodily injury liability. Property damage liability covers the cost of repairing or replacing another person's property, such as their vehicle or other structures, while bodily injury liability covers the medical costs and legal expenses of those injured in an accident caused by the policyholder.

Bodily injury liability coverage

Liability auto insurance covers damage to another person's property and/or injuries to another person caused by an accident where you are at fault. This type of insurance is required by most states to legally drive your vehicle.

For example, if you have BI limits of $100k/$300k and you are at fault for an accident in which one person is injured, your insurance would pay up to $100k for their medical expenses. If four people are injured, your insurance will pay up to $300k total for their combined medical expenses.

It's important to note that bodily injury liability coverage won't pay for your own medical expenses or repairs to your vehicle. It is designed to protect you financially by covering the expenses of those who have been injured by your actions.

Property damage liability coverage

Liability auto insurance covers damage to another person's property or injuries caused by an accident where you are at fault. It is a requirement in most states to be able to drive your vehicle legally. Liability coverage includes two types: property damage and bodily injury.

The amount of property damage liability coverage you need may depend on several factors. For example, if you own a home or other expensive items, or if you frequently travel in high-traffic areas with expensive vehicles, you may want to consider higher coverage limits. Each state sets the minimum required amount for property damage liability coverage, but you may need to purchase additional coverage to ensure adequate protection.

When choosing a liability insurance policy, you will select a coverage limit, which is the maximum amount your policy will pay for property damage you cause to others. It is generally recommended to choose a limit that matches or exceeds your total net worth to protect your assets adequately.

Legal fees and lawsuits

Liability auto insurance can help cover legal fees and lawsuits, providing financial protection if you are responsible for someone else's injuries or property damage. This type of insurance is required by most states to legally drive a vehicle. It typically covers two areas: bodily injury and property damage.

Bodily Injury Coverage

Bodily injury coverage provides payment for medical expenses, lost wages, and other costs incurred by individuals injured in an accident where you are at fault. It also covers legal fees if the injured party files a lawsuit against you. This type of coverage ensures that you are not held solely financially responsible for injuries caused in an accident and can help protect your assets.

Property Damage Coverage

Property damage coverage, on the other hand, pays for repairs or replacements to another person's property damaged in an accident caused by you. This includes not only the other driver's vehicle but also other types of property such as buildings, fences, or personal belongings inside a vehicle. Similar to bodily injury coverage, property damage coverage can also help cover legal fees if you are sued for property damage.

Understanding Policy Limits

It is important to understand the policy limits of your liability auto insurance. Policy limits refer to the maximum amount your insurance company will pay in the event of a claim. For example, a policy with limits of $1 million/$2 million means the insurer will pay up to $1 million for a single claim and up to $2 million for multiple claims.

Additionally, it is crucial to distinguish between policies with legal costs inside the policy limits and outside the policy limits. When legal costs are inside the policy limits, the costs of defending a claim will reduce the amount available to pay any judgment. On the other hand, when legal costs are outside the policy limits, defence costs will not reduce the amount available for judgment payouts.

Choosing Adequate Coverage

When selecting liability auto insurance, it is recommended to choose a coverage limit that matches or exceeds your net worth. This ensures that your assets are well-protected if you are held liable for someone else's injuries or property damage. You may also consider purchasing an umbrella policy, which provides additional coverage for more serious accidents and lawsuits.

Minimum liability insurance requirements

Liability auto insurance is a type of insurance coverage that is required by most states to legally drive your vehicle. It covers property damage and/or injuries to another person caused by an accident in which you are at fault. This type of insurance coverage typically includes two types of coverage: property damage and bodily injury.

The minimum liability insurance requirements vary from state to state in the US. These requirements are usually listed as three numbers, representing the bodily injury liability limit per person, the bodily injury liability limit per accident, and the total property damage coverage. For example, the minimum liability insurance requirements in Alabama are $25,000 bodily injury per person, $50,000 bodily injury per accident, and $25,000 property damage. On the other hand, Alaska has higher minimum requirements of $50,000 bodily injury per person, $100,000 bodily injury per accident, and $25,000 property damage.

It is important to note that these are the minimum requirements, and you may want or need additional coverage depending on the value of your vehicle. It is also recommended to carry more than the minimum liability insurance coverage to protect yourself financially in case of a major accident.

Full coverage auto insurance

Liability insurance is a type of coverage that is required in almost every state. It protects you financially if you are responsible for someone else's injuries or property damage. This means that if you are at fault in an accident, liability coverage will pay for the damages to the other person's property or vehicle, as well as any legal fees if you are sued. It also covers injuries sustained by another person, including medical expenses and rehabilitation costs.

Now, let's discuss "full coverage" auto insurance. It is important to note that there is no single policy called "full coverage" auto insurance. Instead, it is a general term used to describe a collection of coverages that protect policyholders against various circumstances. When insurance agents, lenders, and dealerships refer to "full coverage," they typically mean a combination of liability coverage and physical damage coverage, which includes comprehensive and collision insurance. Comprehensive coverage protects your vehicle from non-collision incidents, such as theft, vandalism, or weather damage. On the other hand, collision coverage pays for repairs or replacement of your vehicle if it collides with another car, object, or if your vehicle rolls over.

While liability insurance is mandatory in most states, comprehensive and collision coverages are usually optional. However, if you are financing or leasing a vehicle, your lender may require you to have both of these coverages in addition to liability insurance. Full coverage auto insurance provides more comprehensive protection than just liability insurance alone. It offers financial protection for your own vehicle and gives you peace of mind in a wider range of scenarios.

The cost of full coverage auto insurance varies depending on various factors, including your driving history, the type of vehicle you own, the coverage limits you select, and your deductible amount. It is recommended to choose a liability coverage limit that matches or exceeds your total net worth to ensure your assets are adequately protected.

Frequently asked questions