Guide to Auto Insurance Liability Coverage

July 27, 2020

When you buy auto insurance, your agent will ask you to make many coverage choices. It’s not as simple as just asking for coverage for a specific vehicle. You have to know the types of coverage that you need and its cost.

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One type of coverage every driver needs, though, is liability insurance. This isn’t a negotiable coverage, as most states require it. Understanding liability coverage and how it works can help you choose the right coverage.

What is Liability Coverage?

Liability coverage covers your liability should you cause an accident. If you are ‘at fault,’ you are responsible for the auto, property, and personal damages that occurred. Depending on where you live, you probably need a specific amount of liability coverage just to drive your car. But you may want to opt for higher than the minimum requirements for your state.

Reasons to Consider Higher Liability Coverage

You may think it’s a good idea to just stick with your state’s minimum requirements, but you could find yourself in a sticky situation if you do.

When you cause an accident, you have no way to predict the cost of the damages. There’s more than just the damage you cause to the other car(s). If anyone in the other vehicles has to go to the hospital, that’s on you. The medical care he or she needs due to the accident becomes your responsibility. If they lose their wages because of time off work, you may be responsible. You may even have to cover the expenses of other professionals they have to hire to help them while they are laid up from the accident.

Typically, the cost of an accident far outweighs the minimum required liability insurance. If it does, the remaining liability becomes your responsibility. This could mean thousands of dollars, which could cause you serious financial distress.

The Types of Liability Coverage

Your liability coverage helps you in two different areas:

  • Bodily injury
  • Property damage

Bodily injury covers any damage you do to another person’s body as a result of the car accident. For example, if a passenger in the car that you hit got a concussion, your bodily injury insurance would cover the cost to treat the concussion.

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Property damage covers any damage you do to another person’s property. This includes other cars, houses, trees, or other personal property. Typically, property damage covers the cost of the damages to the other cars involved in the accident. But sometimes there’s more damage than just to the cars. It could be damage to a tree, fence, or even a house.

Does Liability Coverage Protect You?

The one thing that liability coverage doesn’t cover is you and your car. The damage to you or your car falls under collision and medical coverage. The liability insurance is strictly to cover the liability caused by your accident. Just opting for liability insurance still puts you at financial risk should you or your vehicle experience damage as a result of the accident.

Choosing the Right Liability Coverage

As we stated above, each state has its own minimum liability insurance requirements. But that’s typically not enough to protect you. We encourage you to shop around and find out the cost of increasing the liability coverage to the maximum amount that you can afford. Typically, increasing your liability insurance coverage doesn’t have a dramatic effect on your insurance premiums, so it’s typically fairly affordable.

As you decide how much liability insurance you need, do the math. Think of how much the liability insurance will cost you each year. Then look at the worst case scenario. Without that insurance coverage, could you afford to pay for someone else’s damages including car repairs/replacement and hospital bills? If the thought of thousands of dollars in bills have you panicked, taking a close look at your amount of liability insurance is crucial.

Liability insurance coverage is the one coverage the law requires you to have. But you may want to consider taking on more insurance than even your state law requires. Liability insurance protects the damages that occur to other people and property as a result of your accident. Don’t overlook the importance of this helpful coverage.

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