insurance

Liability Car Insurance Coverage: Everything You Need to Know

May 5, 2022

Different types of auto insurance cover cater to different requirements. For example, older cars don’t need the same insurance cover as a new one. Some car owners want auto insurance that covers every possible scenario. A few people choose basic insurance with less premium, just enough to protect them from the state laws and ensure that the vehicle is not uninsured. 

So, what is liability car insurance? How does it work? When should you opt for this automobile insurance? Continue reading to find out.  

What is Liability Car Insurance?

Liability auto insurance is a must-have in 49 states of the US. Any vehicle you drive should have liability coverage to ensure that the insurance policy covers the damage of an accident or collision. The insurance offers financial protection for bodily injury and property of the third party, i.e., for those injured by the driver of the car. 

If X is the driver who collided with Y on the road, liability coverage provides financial protection and pays for the damage done to Y and their property. This insurance doesn’t offer personal injury protection for driver X. 

Each state has its limits set for the minimum coverage amount for liability insurance. It’s important to ensure that the low-cost auto insurance policy you choose meets the state’s regulations. Liability auto insurance is usually bundled with collision coverage. It is a part of comprehensive insurance that many new car owners opt for. Needless to say, the comprehensive policy and the bundle will have a higher premium. 

What Does Liability Auto Insurance Cover? (include exclusions)

The liability insurance policy deals with three aspects of third-party harm or injury. It represents each in a three-digit number, which denotes the coverage amount in corresponding thousands. 

  • Bodily Injury Liability per Person

This refers to the amount the insurance policy can cover in terms of hospital charges, loss of wages, and other expenses incurred by the person directly harmed/ affected by the incident. 

  • Bodily Injury Liability per Accident 

In the case of a bodily injury accident, this is the highest amount the insurer will pay. The amount depends on the premium you pay to the insurance company. Cheap car insurance with a lesser premium provides a small maximum amount. 

  • Property Damage Liability per Accident 

This denotes the maximum amount the insurance company can pay for damage to the victim’s property (vehicle, home, store, etc.), clean-up costs for setting it right, and other legal expenses if the driver (policyholder) required by the victim. 

There are three issues to factor at this stage: 

First, liability damage insurance includes a deductible, which is the amount you pay from your side before the insurer covers the rest. 

Second, the victim or third party can file a case in civil court if your minimum coverage for liability insurance doesn’t pay for the accident. Ensure you are not underinsured according to the state laws. 

Third, you don’t have to pay more than the predetermined amount for bodily injury. Once the total is fixed by the insurance company, the third party will get only that amount from you. They’ll have to pay for any other expenses they incur. 

Limits to Liability Coverage 

The insurance company determines the final limit for liability insurance. Even the cheapest providers offer the minimum coverage, though it depends on whether you are a low-risk customer or a high-risk customer. 

A person who has been in quite a few accidents will be a high-risk customer for the insurer. The insurance companies set the lowest limit for liability coverage or may even refuse to offer a policy/ renew it. If you want affordable and cheap auto insurance, you need to have a better driving record and a lesser claim record. 

While the usual coverage for third-party property damage is around $10K, it can vary between $5K and $25k. Similarly, the bodily injury coverage per person can be around $25K, but the maximum amount per accident could be capped at $50K. 

You can set your limits and lower the premium price as long as the limit matches the state’s minimum requirements. 

What are the No-Fault States? 

Some US states are termed as no-fault states where the reason for the accident or collision will not affect liability coverage. Personal injury damages must be covered by your insurance company. Drivers have to get property damage liability and bodily injury liability coverage in these states. Florida, Hawaii, Utah, New York, Kansas, etc., are some no-fault states. 

When to Choose Liability-Only Car Insurance?

Full coverage is recommended in most instances. However, if you have an old car, collision coverage isn’t that useful. It makes sense to choose only liability coverage to adhere to the state laws and remain insured. Such car insurance will be affordable and available for a lost cost. 

Ref:

https://www.investopedia.com/terms/a/automobile-liability-insurance.asp

https://www.marketwatch.com/picks/guides/insurance/liability-car-insurance/

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