Updated: January 2016
Liability coverage in an auto insurance policy helps cover the cost of damages you are responsible for as a result of an accident you cause. Liability coverage often includes both property damage liability coverage and bodily injury liability coverage.
Property damage liability coverage will help pay for damages you cause to another person's belongings—be that their car, their mailbox or their front porch—up to your policy limits.
Bodily injury liability coverage, on the other hand, helps pay for another person's physical injury as a result of an accident for which you are liable. It can cover physical injury, pain and suffering, and losses incurred by third parties due to the accident. This type of coverage generally has two limits—one limit applying to each person ($50,000, for example) and another limit applying to each accident (for example, $100,000).
If you were at fault for the accident, the bodily injury liability coverage portion of your policy may help with the following costs:
Medical expenses. Aside from merely paying for emergency services and hospital care, bodily injury liability insurance may also pay for any necessary follow-up doctor's visits and other associated costs, like having to buy crutches or a wheelchair while someone recovers.
Lost income compensation. Say you hit another car, and the driver is seriously injured to the point of having to undergo months of physical therapy. Depending on the type of work that person does, they may not be able to perform the normal functions of their job and might therefore suffer a loss of income as a result of not being able to work. Your bodily injury liability coverage may help to pay compensation in this case.
Legal fees. After an accident resulting in injuries, you may be taken to court by either the injured party or the injured party's insurance company. This may require you to seek legal counsel, which can be costly. Bodily injury liability coverage can help with your legal fees.
Some form of liability insurance is mandatory in all states.
Increasing your liability coverage above the state required minimum limit is a good way to give yourself some peace of mind. If you're found to be at fault in an accident and you don't have sufficient liability coverage, you will likely have to pay out of pocket for the damages that resulted from the crash—and in some cases, that can be a lot of money.
It's important that you not only obtain the minimum coverage required by your state, but that you consider establishing limits that are high enough to cover the costs that may result from a crash. Want to explore your options? Contact an Allstate agent today.