Liability Insurance: Understanding the Coverage and Limitation
Auto liability coverage is required in most states. Liability insurance covers you if you cause damage or injury to another driver, their passengers and/or their property or if you injure pedestrians.
Liability insurance has two components: bodily injury liability and property damage liability. Bodily injury liability will protect you if you are found liable for someone’s medical expenses or if you’re sued for having caused harm. Property damage liability will cover damages you cause. This coverage protects you if you’re found liable for repairing someone else’s car or for hitting public/private property and are held liable for the damage. No one thinks they will have an accident and many people are unaware that this type of insurance only covers other parties, not themselves or their passengers. If you are in an accident, your liability coverage will not pay for damages to your car or for medical expenses related to the accident. If you want yourself and your passengers to be covered you should add collision coverage to your standard auto insurance policy.
You’ll also want to set limits that are high enough to cover you if you cause damage or injuries. Each state has minimum coverage limits for bodily injury liability and property damage liability. Your bodily injury liability limit is set per person, for each individual injured in an accident you cause. There’s also a bodily injury liability limit per accident, so if several people are injured in an accident there’s a limit per person and per accident. With property damage liability you set a maximum amount and would not exceed the limit you’ve set if you’re found liable in an accident.
Usually, bodily injury and property damage liability coverages are lumped together. A sample coverage would be 25/50/10, which breaks down to $25,000 bodily injury per person, $50,000 bodily injury per accident limit and $10,000 property damage limit. Anything that goes over these amounts will be your responsibility.
There is no deductible for liability insurance. However, your rate may go up if you’re in an at-fault accident.
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