Published: February 2013
Liability car insurance covers damages to another person resulting from an accident you cause. One of the most basic types of auto insurance coverage, liability is also one of the few coverage options that's mandatory in every state—though minimum limits of coverage vary, depending on where you live.
But what is liability coverage? Read on for some useful information.
If you're found to be at fault in an accident, liability coverage will help you pay for damage to another person's property (this is called property damage liability) or for costs associated with their injuries (the coverage known as bodily injury liability) that you are responsible for.
When you're reviewing the liability coverage options of your auto insurance policy, you will notice different limits:
Property damage liability limit. This is the maximum amount your insurer would pay for damage to another party's property. The maximum payout would not exceed the limit you've set.
Bodily injury liability limit per person injured. This establishes a maximum payout for each individual who is injured in an accident that you cause, up to your policy limit.
Bodily injury liability limit per accident. This sets a cap on the total amount that your insurance provider will pay out for all damages associated with a single accident you cause. It's important to set this limit high enough so that it will be enough to pay the medical expenses incurred by multiple people.
Consider the following: You are at fault for a crash that injured three people in another car; your bodily injury liability limit per person is $50,000 and your bodily injury limit per accident is $100,000. If Person 1's medical bills total $40,000, Person 2's cost $30,000 and Person 3's cost $25,000, you're likely covered, as each person's bills were under $50,000 (your bodily injury limit per person), and the total cost of injuries is $95,000, which is lower than your $100,000 bodily injury limit for a single accident.
Liability coverage typically doesn't pay for damage to your own car or costs associated with your own injuries from an accident you cause. There are other types of coverage to consider. For example, collision coverage can help you pay for damage to your own vehicle.
Liability coverage also does not extend to your injury costs. If you want this type of coverage, you may want to consider medical payments coverage or personal injury protection.
When you purchase an auto insurance policy with liability coverage, you should pay attention to the limits. You need to meet the state's minimum required limits, of course, but you may want to purchase a policy with higher limits to make sure you're better protected. The reason is that, if the damage you accidentally cause exceeds the limits of your coverage, you may be held financially responsible for the difference.
As you consider what kind of auto insurance policy to purchase, talk to an insurance agent about your options and the liability coverage limits that make sense for you.