INSURANCE GUIDE

Liability coverage is the most basic coverage type in all auto insurance policies. Liability insurance is also a key part of any more comprehensive plan your may get. Liability insurance coverage is not the portion of your insurance that covers your own injuries or property loss, but is instead used for the medical bills of accident victims, or to replace the vehicle or any other property that may have been damaged.

auto liability coverage
Learn All About Auto Liability Coverage (Image source – FLICKR)

Liability insurance is usually provided in two parts, bodily injury and property liability. Bodily injury is to cover injuries that are physically caused to other people, and property liability insurance, as the name implies, covers damage that is caused to the property of that person, or persons. In some cases your coverage may be required to cover multiple people who have been hospitalized, or to replace more than one vehicle. In others, the damage may only be to property, such as a mailbox, light pole, or simply to cover minor collision repairs. Most states require liability insurance coverage as the absolute minimum allowed by law. Continue reading below to learn more about these two types of liability coverage.

Bodily Injury Liability

As stated above, bodily injury liability auto insurance covers your financial responsibility for the other driver’s medical costs. Typically, policies cover the policyholder anywhere in the United States, and will also cover someone who borrows his/her car with permission. Bodily injury liability is an important aspect of your auto insurance policy because medical expenses can run sky high, especially when pain and suffering damages are added.

Bodily injury liability is not the area to try and save money on your premium (your insurance payment). Due to the high cost of medical bills, it may be wise to purchase more than the state mandated minimum of bodily injury coverage. If the other motorist, or his/her passenger(s), incur injury expenses which exceed your policy’s coverage, you can be sued for the additional amount. If you own a home, or have sizable financial savings, it is a good idea to protect your investments with adequate bodily injury coverage.

Property Damage Liability

As we previously mentioned, property damage auto insurance covers the costs of damages to the other driver’s vehicle should you be involved in an auto accident. Typically, it also covers the damage done to another vehicle by someone driving your car with your permission.

While, generally, it is another vehicle that would be damaged if you were to be involved in a collision, property damage liability also covers damage done to lamp posts, telephone poles, fences, buildings or other structures you may crash into.

Minimum Liability Requirements

When purchasing an auto insurance policy, liability insurance is often represented by 3 numbers, such as 50/100/25. This is called a “split limit”, and is broken down in the following way:

  • 50 represents $50,000 of single person bodily injury liability.
  • 100 indicates $100,000 total will be paid towards all injuries combined.
  • 25 stands for $25,000 in total property damage coverage.

Minimum Requirements In Your State

With today’s rising health care costs, a hundred thousand dollars of liability coverage may not even be close to enough to cover medical costs, especially if more than one person has been seriously injured. The same holds true for property, as well. And any difference between your insurance coverage and the total amount will be your own responsibility to pay. Having inadequate coverage could, without exaggeration, cause financial ruin, up to and including losing your home to pay for the medical bills of others. Obviously, this is a situation we would all want to avoid, and this is why most states require it as a minimum coverage.

It is important that you understand that this coverage does not include the policyholder, but is instead applied to injuries to other people or their property for which the policyholder may be held responsible. As you see, liability insurance can be the difference between getting over a nasty accident and moving on, or having such an accident and finding yourself faced with financial ruin. Even though most states have a minimum liability insurance coverage that you must have, it is strongly recommended that you obtain higher coverage, since the minimum may be used up before the costs incurred in an accident are absolved. It is very much in your best interest to pay slightly higher premiums for more comprehensive liability insurance protection, than to find that you have left yourself short of having enough insurance to cover your liabilities to victims of an accident.