Liability coverage helps pay for bodily injury and property damage expenses if you hurt someone or harm their things. Here, we’ll discuss how it works and why choosing the right limits is so important.
What happens if you’re found at-fault in an automobile accident?
If you caused damage to the other person’s vehicle or their body, your auto insurance policy’s liability coverage kicks in. This way, it provides much-needed money to help repair their vehicle and pay for their related medical expenses.
Despite its importance, though, making sure you have sufficient auto liability coverage isn’t as easy as picking a number out of thin air.
In this brief article, we’ll discuss this critical coverage’s fundamentals, real-world examples that can help you better understand its importance, and how you can choose appropriate limits to adequately cover you in the event of the unthinkable.
How Does Auto Liability Coverage Work?
The liability portion of your auto insurance coverage encompasses two main parts: property damage (PD), and bodily injury (BI). Let’s take a closer look at their differences.
What’s the Difference Between Bodily Injury & Property Damage?
Imagine that you rear-ended someone at a stoplight, which caused them to veer off the road and crash into a nearby mailbox, fence, and tree. After the final bill was tallied, this caused $10,000 in damage to the person’s car, plus costs to remove the tree and repair the mailbox and fence.
So that you, the other driver, and the homeowner, don’t have any out-of-pocket expenses, this is where the property damage portion of your auto policy enters the picture.
After a couple of days, the driver was also diagnosed with whiplash by a medical professional, which caused them to miss a week of unpaid work. Add to the total bill another $5,000, which is where your auto policy’s bodily injury arrives on the scene.
In addition to emergency and ongoing medical expenses and loss of income, bodily injury would also help cover your legal fees if the accident resulted in a lawsuit, as well as pain and suffering and funeral costs if the individual were to die.
What Doesn’t Automobile Liability Insurance Cover?
The bottom line is that the liability portion of your auto policy only kicks in when you cause harm to someone else.
As a result, bodily injury or property damage doesn’t cover damage to your vehicle (which falls under comprehensive or collision coverage) or liability for you or anyone else in your car (covered under medical payments).
How Are Liability Limits Displayed on Your Auto Policy?
If you take a look at the declarations page of your auto policy, you’ll notice that your liability coverage is listed as a series of three numbers separated by slashes. Something like this: 100/300/100.
The first number (100, in this example) represents the bodily injury limit provided for each person by your auto policy. So, it would pay up to $100K for someone else’s medical expenses, lost wages, and so forth, per accident.
The second number (300) references the total per accident limit, regardless of the number of people involved. Therefore, if the vehicle you rear-ended in our example above had six people inside, each of whom sustained $100K in medical expenses, it would exceed your policy’s $300K limit.
Finally, the third number indicates that your policy has a $100K property damage limit, per accident.
Are There Different Auto Liability State Requirements?
Except for Florida, every state in the US requires that drivers carry bodily injury (BI) coverage in order to legally operate a vehicle, whereas all 50 states require that you have property damage (PD) coverage.
However, the minimum required limits aren’t shared by each state. As a few examples, the current minimum limits in Texas are 30/60/25, whereas they’re 25/50/25 in Oklahoma and 25/50/10 in New Mexico.
However, in our increasingly litigious society, the reality is that state-mandated minimums often aren’t enough to provide peace of mind for most of today’s responsible drivers.
The good news is that increasing your liability coverage typically doesn’t add much to your annual premium, although the few extra dollars you spend each month could prove invaluable if you’re involved in a severe at-fault accident.
How, then, can you make sure you have sufficient coverage? We’ll answer this next as we wrap everything up.
Where Can You Turn When Choosing Auto Liability Coverage?
The goal of auto insurance is to “make you whole” again after an unforeseen accident.
But, when it comes to auto liability coverage, we don’t think the question should necessarily be, “How much coverage can I afford?” Instead, a better perspective on the situation is, “How much can I afford to spend out of pocket of I’m found at-fault?”
That’s where the auto professionals at IHS Insurance Group can help. We’ve assisted drivers like you with finding the coverage they need at prices they can afford since 2008!
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