Liability insurance is one of the most important types of auto insurance coverage you can get. It helps protect you, up to the limits of your policy, in case you cause an accident that causes injuries or property damage.
Liability insurance is required by most states. However, you may want to consider purchasing more liability insurance than your state’s minimum requirements.
Coverage
Liability insurance provides the coverage you need to pay for others’ losses in an accident. It’s a legal requirement in most states and consists of bodily injury liability (BI) and property damage liability (PD).
In a typical accident, your BI liability will cover medical expenses for other people in your car, recovery treatments and lost wages if they can’t work after the accident. If the accident was fatal, it will also cover funeral costs. Your PD liability will cover damage to other people’s cars, or other things that are damaged in the accident, such as a fence you hit.
Many states require drivers to carry minimum levels of liability insurance, but you can purchase more. It’s best to talk with your agent about the level of coverage you need and get several quotes.
The amount of liability coverage you buy will impact how much your premium will be. The higher the limit, the steeper your premium will be.
Your state may require you to post a bond to show financial responsibility, or it might not. The amount of this bond will vary by state.
Some states have no-fault laws, which means that all injuries are covered regardless of who is at fault for the accident. Other states have no-fault law but require drivers to carry personal injury protection (PIP).
This coverage pays for your injuries and those of your passengers, no matter who is at fault for the accident. It also covers the cost of lost wages and household expenses if you can’t perform them due to your injuries.
In some no-fault states, your PIP coverage will pay for repairs to your car, minus your deductible, up to the limit written into the policy. It also covers medical bills for yourself and your passengers if you’re not at fault for the accident.
You can also choose to purchase uninsured motorist coverage, which covers your injuries and those of your passengers if you’re in an accident with an uninsured driver. This coverage is also optional in some states, but it can be useful if you live in an area where there are high rates of uninsured drivers.
Limits
Liability insurance coverage is designed to pay for the financial costs of repairing other people’s property and paying their medical bills if you cause an accident. In addition, it pays your legal fees if you are sued for damages in an at-fault accident.
Most states require you to carry minimum liability limits, but you can choose higher limits if you think they are more appropriate for your situation. If you decide to purchase higher limits, it will likely increase your premium, but the cost is usually worth it if you save yourself thousands in out-of-pocket expenses after an accident.
Coverage limits are a vital part of any auto policy, as they help you know what your insurance company will pay out in the event of an accident. They typically consist of three numbers, and they represent bodily injury (BI) liability, property damage (PD) liability, and total coverage limits.
In a real-life scenario, let’s say you hit another car at a four-way stop. The other driver is injured and their vehicle is damaged.
If you have the state-mandated minimums of $25,000/$50,000/$25,000, your policy will pay out up to that limit for both the driver and passenger’s injuries. Their car was also damaged in the crash, but because of those limits, you won’t have to pay out of pocket for that.
It’s always a good idea to review your auto liability policy limits regularly, as life can change. For example, if you add a teenage driver to your policy or purchase a home, you may want to change the limits on your liability coverage to protect your assets in case of an accident.
Deductibles
The deductibles provided by automobile liability insurance are an important part of any policy. The deductible is the amount of money that you must pay out of pocket before your insurer starts to cover the cost of repairs or replacement. This is generally a dollar amount or percentage of the value of the insured loss.
Deductibles are also a great way to help control costs and increase your savings when you make a claim on your insurance. Choosing the right deductible depends on a variety of factors, including how much you can afford to pay out of pocket for repairs and your budget.
For example, if your Comprehensive coverage has a $500 deductible, you would be responsible for paying that amount before the insurance company would pay any of the claim. The insurance company then subtracts the deductible from the cost of repairs or replacement to determine how much they will write you in a claim check.
Some deductibles are calculated in terms of a specific amount, while others are based on the insured value of your car. For example, a 2 percent deductible on your comprehensive coverage would mean that $2,000 would be subtracted from the insurance company’s claim payment if you had an insured loss worth $10,000.
In addition to a deductible, some types of car insurance policies provide personal injury protection (PIP) coverage, which pays for medical expenses or lost wages for yourself and anyone else in your vehicle if you are involved in an accident. PIP deductibles can have an impact on your premium, so you should speak to an agent about the best option for you.
If you live in an area that often experiences hurricanes or other strong winds, you may be eligible for a wind/hail deductible. These deductibles are typically set at a lower amount, so they can be an effective way to lower your car insurance premiums while protecting your home from damage.
Choosing the right deductible is a personal decision, but it can help you save money on your car insurance premiums and avoid paying too much out of pocket in the event of an accident. When deciding on a deductible, it’s important to consider your lifestyle and driving habits as well as your personal budget.
Exclusions
Auto liability insurance is a type of policy that protects you and your business if you are found to be at fault in an accident. However, like any other type of insurance, automobile liability coverage comes with a list of exclusions.
These exclusions, or limitations, are listed in your policy and can vary depending on the plan you choose and your insurer’s guidelines. They can be related to a person, property, location or peril.
Driver exclusions: You can exclude a specific person from your auto policy if you do not want them to drive your car. These can include teens, roommates and even spouses if they live with you.
If someone is excluded from driving your vehicle, you will not be able to file a claim against them if they cause an accident or get into an incident. This is a great way to save on your premiums and keep coverage affordable.
Hired and non-owned vehicles: If an employee uses their personal vehicle for company purposes while fulfilling work duties, such as a salesperson who drives to various customer locations or a home health or social worker who transports patients from one place to another, this is covered under the hired and non-owned section of your policy.
Injuries resulting from using your vehicle for business purposes can also be excluded under this section of your policy. This includes injury to yourself, passengers in your vehicle or other vehicles involved in an accident.
Punitive damages: A jury can award punitive or exemplary damages to an injured party in court. These awards can be large and can result in an excess amount being paid by your policy.
Act of God: An act of God can include natural occurrences such as weather conditions and other events that occur outside the control of the insured. This could happen during a storm or when the insured is on their way to work.
Owned but unlisted vehicles: An exclusion is included in the liability section of your auto policy if you do not list all of your vehicles on your policy declaration sheet. This includes rental cars, leased cars and vehicles that are owned by the insured but not listed on the declaration page.
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