Auto liability insurance is a kind of insurance policy for cars that in most states is mandated by statute. If you cause a car accident, in other words, insurance compensation helps pay for the damages of the other party if you are responsible for the accident.
Auto liability coverage comes in two forms: liability coverage for personal injuries and liability coverage for property harm. Drivers must have all forms of coverage in most jurisdictions.
What Is Covered By Liability Insurance?
Many forms of insurance plans provide insurance for liability. Generally speaking, if the policyholder is held responsible for causing the harm or injury, it helps compensate to repair the property of another person or for their medical expenses.
Auto liability insurance helps cover the medical costs and property loss of another person by these two forms of coverage:
Bodily Injury Liability Coverage (sometimes abbreviated as “BI”)
If you’re liable for an accident that injures another person, the coverage of bodily injury liability helps pay for their medical expenses. This coverage will, for example, help you from paying out of your own pocket for the X-rays and care of the injured person.
Property damage liability coverage (sometimes abbreviated as “PD”)
If you cause an accident that affects the property of someone else (their vehicle, for example), the coverage of property damage liability helps compensate for repairs. For instance, this coverage will help prevent you from paying out of pocket to fix the other driver’s vehicle if you rear-end another car.
Coverage Limitations Of Liability Insurance
Depending on the coverage limits that you chose, the amount the insurer can pay for a covered liability insurance claim. Each state sets minimum limits of coverage for liability for bodily injury and liability for property damage that drivers must buy, however you can elect to purchase additional coverage. On your auto insurance policy, you can see three liability coverage limits:
Liability cap for property loss
This is the maximum amount that will be charged by your insurer to repair harm you do to the property of another person. The actual reward will not be greater than the limit you have set.
Limit liability for bodily injury per person
For each person who is injured in an accident that you cause, this establishes a maximum payout.
Limits of responsibility for personal injuries per accident
This sets a limit on the total amount that can be paid out by your insurance company on all medical costs that other people experience from a single accident you cause. Setting this cap at an amount that makes you comfortable is significant, since it might be required to help pay for the medical costs incurred by other individuals.
Most insurers package bodily injury and property damage limits together. For example, you may be able to purchase auto liability coverage with limits like the following:
25/50/10 ($25,000 BI limit per person, $50,000 BI limit for accident, $10,000 limit for property damage)
100/300/50 ($100,000 BI limit per person, $300,000 BI limit per accident, $50,000 limit for property damage)
In other words, you will not be able to select standalone limits for personal injury or property damage compensation. The coverage limits will depend on the packages the insurer provides.
How much is the cost of liability insurance?
The price you would pay for liability insurance is dependent on a range of variables, including the amount of coverage you buy. The higher the cap of your coverage, the more likely you’ll pay for liability insurance. When you change your cap, your insurance company will tell you how much your policy would cost.
How much liability insurance do you purchase?
Any expenses exceeding the limits of your liability coverage are your responsibility. In other words, you will have to pay them out of your own pocket. That’s why, by buying more coverage, it might be a smart idea to increase your auto liability limits above the minimum requirements of the state.
Take the following into consideration: You are responsible for a collision that injured three people in another vehicle. Your liability cap for bodily injury per person is $50,000 and your limit for bodily injury per accident is $100,000. If the medical costs of Person 1 exceed $40,000, the cost of Person 2 is $30,000 and the cost of Person 3 is $25,000, you’re definitely safe. The bills for each victim is under $50,000 (the bodily injury cap per person), and the average cost of accidents is $95,000, which is smaller for a single accident than the $100,000 bodily injury limit.
But suppose that all three individuals had $50,000 in medical bills, $150,000 in total. Under any scenario, you will pay $100,000 for those bills for your bodily injury insurance compensation, and you would need to fund the remaining $50,000 yourself.
What is not covered by liability insurance?
Usually, insurance coverage does not compensate for an accident to repair damage to your own car; crash coverage assists with that. It also doesn’t pay to fix damage caused by other causes, such as hail, which can be paid for by extensive coverage.
Liability compensation also does not cover damages due to your own injury in an accident that you have caused. If you want this sort of coverage, you may want to seek coverage for medical payments. Your insurance provider will help address auto liability insurance questions or the coverage requirements of your state.