What Does Liability Insurance Cover?
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Owning and driving a vehicle comes with many responsibilities. Not only are you responsible for managing 3,000+ pounds on the road, but if it causes any damage to someone’s vehicle or person, the financial duty for payment might fall on your lap. This is where various types of insurance come into play.
Liability car insurance is the most basic car insurance often required to drive legally and it’s an important part of every car insurance policy. When you or a driver covered under your policy are involved in an accident in which either of you is at fault, liability coverage is there to help cover the costs of the person or people in the other vehicle who were not at fault.
Below, we cover the basics of a liability car insurance policy, including what its coverage limits are, the limits you need, what your state requires, and what happens if there’s a gap in your liability car insurance policy.
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What Are Liability Car Insurance Coverages?
All car insurance policies have coverage limits which indicate the max amount they’ll cover in damages. Liability car insurance is no different. These limitations allow the insurance company to offer various pricing tiers, while allowing drivers to choose whether they want a higher tier with additional coverage or a lower tier offering the bare minimum and therefore lower rates.
With liability car insurance, these coverage limitations are displayed as a set of 3 numbers such as 50/100/50. This includes three types of coverage grouped together which are measured in the thousands of dollars.
In the 50/100/50 example, the coverage would be:
- $50,000 bodily injury limit per person
- $100,000 total bodily injury limit for all parties
- $50,000 for property damages
The first number is the bodily injury limit. It indicates how much your policy will pay out per person for injuries in an accident where you are at fault.
The second number is also a bodily injury limit, but it indicates the maximum amount your policy will pay out for all people injured in an accident where you are at fault.
Insurance companies refer to these limits as bodily injury liability coverage. This not only covers the medical bills, loss of income, pain and suffering, and more for the injured person, but it may also cover your legal expenses if you’re sued for someone’s injuries in an at-fault accident.
The third number is how much your auto insurance policy will pay out for property damages, also known as property damage liability coverage.
What is a Combined Single Limit Policy?
While the structure above clearly spells out the limits for each liability type, it has a downside: You might still be left with expenses that your insurance company won’t cover.
For example, if you have a 50/100/50 policy – 50K in bodily injury, 100K in total bodily injury, 50K in property damage – and you’re in an accident that results in $80,000 worth of property damage your insurance policy will only cover $50,000 of the property damage because that’s your policy limit. You could be sued for the remaining $30,000 in damage.
Combined single limit (CSL) policies can help to avoid this situation. These policies lump all of your coverage under a single amount. Your 50/100/50 policy would be referred to as a $200,000 CSL policy. When your coverage is lumped in a single amount, you can use that full amount toward both bodily injury and property damages. In this example, your policy would cover the $80,000 in property damages. If you’re looking for extra protection or have assets, like a home, that you want to protect, you might want to look for a CSL policy or increase your policy limits.
What Liability Limits Do I Need?
Reducing your liability coverage limits to the state minimums is a common way to lower your car insurance rates, but it isn’t always the best solution.
Let’s say you cause a car accident that injures three people. Also, also assume the minimum amount of coverage your state requires is a 25/50/25 split limit.
The first two people to file a claim against you could each receive up to $25,000 for medical payments. Those 2 claims meet your max bodily injury limits for all parties. In this case, any damages the third person has won’t be covered by your insurance.
So, what happens next?
They have the right to personally sue you for their medical expenses if their policy does not have an uninsured 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 additional coverage and being protected. Besides, there are safer ways to lower your car insurance costs.
When deciding how much liability insurance you need, more is generally better, as long as you can afford the premiums. It’s important to consider what you could afford to pay if you were liable in an accident. If your liability insurance coverage came up short, could you pay the remaining $10,000, $15,000, or even $25,000? Medical bills and car repairs can be incredibly expensive, so unless you have substantial savings, you’ll want to know that you have the liability protection that you need so you aren’t financially responsible after an accident.
Do States Set Minimum Liability Insurance Requirements?
Almost every state requires you have a minimum level of liability insurance coverage to drive legally. The minimum liability coverage level is typically included in any insurance policy sold, but it’s generally a good idea to opt for additional coverage limits to protect you from unexpected situations like the one above.
Some states, like Virginia, allow you to opt out of liability insurance, and instead pay a waiver fee, but if you finance your vehicle, your lender will probably require you to be fully insured, which includes not liability insurance, but also comprehensive and collision coverage. You will need to carry this coverage until you fully pay off your auto loan.
If you’re uncertain whether you need liability insurance, you can contact your Department of Motor Vehicles for additional information. Keep in mind that even if your state doesn’t require you to carry liability insurance, it’s still a good idea to invest in this additional coverage. Paying a $500 waiver fee, like some Virginia drivers do, only excuses you from carrying insurance. You’ll still be financially responsible if you cause damage in an accident.
Liability insurance can help to protect you from a lawsuit, which can quickly become very expensive. Knowing that you have liability insurance will also give you some peace of mind if you are ever in an accident.
Can I Put Liability Insurance on Any Vehicle?
Technically, yes. As long as you’re meeting your state’s minimum insurance coverage laws, you can put liability coverage on any vehicle registered in the state. However, if your vehicle is financed or leased, the bank or leasing company will have its own insurance requirements to protect their investment until you pay for the vehicle in full.
These requirements are often just full coverage, but some may also include a maximum deductible and minimum coverage limits.
If you fail to meet these minimums, the lender could put in place its own insurance policy and add the premium to your monthly payment. Oftentimes, these force-placed insurance policies are far more expensive than what you could find independently and have no coverage for personal injuries — they cover the vehicle only.
When shopping for insurance, always check with your lender or leasing company to find out what the minimum insurance requirements are and ensure you meet or exceed them.
What Doesn’t Liability Auto Insurance Cover?
While liability insurance covers bodily injury to other people and another person’s property in an accident where you’re at fault, there is still a lot it leaves uncovered.
Damage to Your Vehicle
Liability insurance does not pay for damages done to your vehicle in an accident you’re at fault for. This kind of coverage is included in the collision insurance that comes with a full-coverage auto insurance policy.
It also won’t cover damages caused by a collision with something other than another vehicle, like a tree or an animal.
Uninsured or Underinsured Motorists
If you’re involved in an accident with an uninsured motorist or one with insufficient insurance to cover your damages, a liability auto policy will not help. You would need uninsured motorist coverage to receive this benefit, which is generally part of a full-coverage policy as well.
A liability policy also won’t cover non-collision damages. These are things like theft, vandalism, hail or water damage, a tree falling on your vehicle, a rock striking your windshield, and more. To cover these types of damage, you need comprehensive coverage.
Finally, any injuries you suffer from the accident aren’t covered by liability insurance. You would need a personal injury protection plan add-on.
How Much Does Liability Insurance Cost?
Several factors will affect your liability insurance costs, but the following data can give you a sense of the average cost of liability insurance:
- For women: $964 per year
- For men: $1,014 per year
- If you don’t have any traffic tickets: $964 per year
- If you have one or more traffic tickets: $1,156 per year
- If you don’t have any at-fault accidents: $959 per year
- If you have been at-fault in 1+ accidents: $1,291
Since the cost of liability insurance fluctuates depending on the amount of risk the insurance company is taking on to insure you, you can help keep costs down by maintaining a clean driving record.
Other factors will affect your liability insurance costs, too. Your marital status, credit rating, where you live, and even how much you drive can all increase or decrease your premiums. If you want to save money on your car insurance, find out if your insurance provider offers any discounts.
It’s also helpful to get a quote from multiple insurance companies to find out just what liability insurance would cost. Compare.com makes this easy, and you can receive quotes from up to 65 insurance providers so you can make sure you’re getting the best deal.
In addition to what you pay for your liability insurance premiums, it’s important to remember that you will also be responsible for your liability insurance policy’s deductible. Deductible amounts can range, but they often start at $500 per claim. You will need to pay this amount out-of-pocket before your insurance company will cover the remaining damages. When shopping for liability insurance, it’s a good idea to choose a policy with a deductible that you know you could afford, just in case you ever are in an accident.
Choose the Right Levels of Liability Car Insurance
A liability insurance policy is a basic, yet necessary coverage included in every car insurance policy. You can feel confident in your selection of coverage limits by using the information provided above.
When shopping for car insurance quotes using our auto insurance comparison tool, you’ll find that our pre-set packages make choosing coverage limits simple. For those that want total control over their car insurance policy, we allow you to customize individual coverage options. Start a quote below today and see just how easy it can be to find the best policy at the right price.
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