What is Liability Coverage?April 29, 2016
Car insurance liability coverage is a core component of a typical car insurance policy. Liability coverage for your vehicle is what protects your personal assets in the event you or a driver covered under your car insurance policy are involved in an accident in which you or the driver covered under the policy are at fault.
Liability Coverage and your Car Insurance Policy
Typically displayed as a set of numbers with slashes between them (e.g., 50/100/50), liability insurance includes several types of coverage grouped together which are measured in thousands of dollars. The first number indicates how much your policy will pay out per individual injured in an accident in which you are at fault. The second number indicates the maximum amount your policy will pay out for all people injured in an accident where you are at fault. The third number is how much your car insurance policy will pay out for property damages.
Why Car Insurance Liability Coverage Levels Matter
Reducing your liability coverage levels to the state minimums is an increasingly common way to make your car insurance premium lower, but we wouldn’t recommend it. Let’s say you accidentally cause a wreck in which three people are injured. Let’s assume your coverage levels are set at 25/50/25. The first two people to file a claim against your insurance would each receive $25,000. However, because your policy states that it will pay a maximum of $50,000 per accident, the third person will not receive anything, even if they attempt to file a claim with your insurer. What happens next? They have the right to sue you personally to cover their medical expenses if their policy does not have an underinsured motorist clause. Not having enough coverage could potentially land you in some hot legal water. Raising your liability coverage levels doesn’t typically cause a steep rise in your car insurance premium, so it’s worth having the coverage and being protected. Besides, there are safer ways to lower your car insurance payments.
Mandatory Liability Coverage Levels
Almost every state has a required minimum level of liability coverage that car insurance policy holders in that state must have. The minimum coverage level is typically included in any insurance policy sold, but again, it’s generally a good idea to set these above minimum levels if at all possible.
It’s That Simple
Liability coverage is a basic, core component of pretty much every car insurance policy. You can feel confident in your selection of coverage levels by using this information to aid you. If you’re getting a quote from compare.com, you’ll find that our pre-set packages make choosing coverage levels simple. For those that want total control over their car insurance policy, we also allow you to customize individual coverage options. Start a quote today and see just how easy it can be.
Auto Insurance A to Z
It’s easy for a lot of folks in auto insurance to forget that most people don’t know what they’re talking about when they refer to liability coverage, or an SR-22. Our Auto Insurance A-Z Guide helps decrypt things, unpacking these concepts into language you and I can understand.