Car Liability Insurance
What Is Liability Car Insurance?
A car liability insurance is part of a car insurance policy that provides financial protection towards a driver who has damaged another person or their property while driving a vehicle.
It only covers damages or injuries to third party individuals and their properties, not to the driver or his property, which may be covered in a separate provision of the policy.
There are two elements of liability car insurance. The first one is bodily injury liability, and the other one is property damage liability.
How Car Liability Insurance Works
The cost of damages resulting from a vehicular accident is what liability car insurance covers. In some states, if a driver happens to be at fault in the vehicular accident, their insurance company will be paying the property, including the medical expenses of other individuals involved and injured in the accident, within limits stipulated in the policy.
However, in regions requiring no-fault auto insurance, drivers involved in a vehicular accident must first file a claim with their respective insurance companies regardless of who was actually at fault. In those regions, drivers are usually obliged to secure personal injury protection (PIP) coverage. It intends to cover their accident-related medical expenses, including those of the passengers of that vehicle.
Liability car insurance includes two different types of coverage:
The bodily injury liability portion of a car insurance policy has coverage just for the at-fault driver. That means they're not responsible for the other party's emergency and ongoing hospital fees, funeral costs, or income loss because of the accident. It also helps cover the legal fees of the policyholder should the accident end up in court.
Property damage liability helps cover repair and replacement costs of the other driver's vehicle that was damaged in the accident. It also covers damages done by the policyholder's vehicle to other forms of property in the event of the accident.
Liability Car Insurance Coverage Limits
Liability car insurance has some dollar limits on its individual elements, depending on the extent of the coverage you choose upon buying the policy. Those limits include the following:
Liability Limit for Property Damage
This limit is the highest amount of coverage for damages done to the property. Costs exceeding the limit become the obligation of the driver at-fault.
Liability Limit for Bodily Injury per Person
Should an individual get injured in an accident, the liability limit for bodily injury per person is the maximum amount that the policyholder receives from the insurance company.
Liability Limit for Bodily Injury per Accident
This is a financial cap for the total amount the insurance company pays for all individuals harmed in an accident. The insurance policy will help cover hospital expenses for the injured individuals by the driver at-fault, but only up to a calculated amount. The driver at-fault will be the one responsible for any hospital expenses beyond that limit.
Requirements for Liability Car Insurance
According to the standard set by each state, there's a minimum for how much liability coverage each motorist must be able to have. For instance, a state might necessitate all drivers to acquire liability insurance that can cover $25,000 for injuries to one person alone, $50,000 for injuries to multiple individuals, $50,000 if one person happens to die from the accident and $10,000 for damage of properties. Drivers can opt to purchase additional liability insurance on top of their state's required minimum coverage. Often, it's a smart idea since hospital bills and medical expenses can be very costly.
If you have considerable properties that you want to be protected from possible litigations, you may choose to consider purchasing an umbrella insurance policy. It increases the liability coverage both on your auto and homeowner's insurance policies for up to $1 Million or more.
Example of Liability Car Insurance
The following is an example of how liability car insurance can work in a state without no-fault insurance. For example, the motorist had a liability car coverage with their insurance company reflecting the following information:
- Bodily injury limit per accident - $150,000
- Bodily injury liability limit per person - $60,000
The policyholder gets into an accident that involves multiple individuals and was declared at-fault for damages.
- Person A has hospital expenses amounting to $30,000
- Person B has hospital expenses amounting to $40,000
- Person C has hospital expenses amounting to $50,000
The at-fault driver's liability will be covered in these cases because each person involved in the accident had hospital expenses of not more than $60,000. Furthermore, the total amount for every person involved (aside from the driver at-fault) was $120,000, proving to be less than the bodily injury limit per accident.
It's noteworthy that some policies will not automatically cover expenses beyond the per-accident limit, even if the per-person limits have not been reached or exceeded. Using the above example, let's assume that each individual had hospital expenses of $55,000. Though it still falls within the limit per-person of $60,000, the total cost of $165,000 already exceeded the per-accident limit, which we know is priced at $150,000. Therefore, the at-fault driver shall be liable for the amount of $15,000.
Though there's always a set minimum for car liability insurance coverage, it would be wise to buy more than its required minimum level.
Liability vs. Full-Coverage Automobile Insurance
There are also coverages such as collision and comprehensive insurance that insurers offer in addition to the liability coverage that your state requires. A policy having all these three components - liability, collision and comprehensive - has been sometimes referred to as providing "full coverage." Apparently, a full-coverage policy will cost you far more than a liability-only policy but will also protect you from a lot more risks, financially.
Unlike property damage liability insurance covering another individual's vehicle should you damage it, collision, and comprehensive insurance help cover your own car.
- Collision insurance helps you pay for repairs or replace your vehicle if it's a total wreck and has been greatly damaged in an accident involving an object (such as a tree or wall) or another vehicle.
- Comprehensive insurance helps you pay for replacement or repairs to your vehicle if it's stolen or damaged in an incident that is not a collision. It usually covers damage resulting from vandalism, fire, or falling objects such as a large tree branch or storm.
Vehicles that are free and clear are not required to avail of these types of insurance. It is optional. But, if the vehicle is financed by a third-party bank or financial institution, then the lender may oblige you to acquire them. The lender naturally wants to protect the vehicle's value because it is still collateral for the loan. But even if you are not required to obtain collision or comprehensive insurance, you may opt to buy it still, unless, of course, if you can easily get an out-of-pocket for a major repair bill.
Many of these provisions can vary from one state to another, so it's always worth consulting one knowledgeable insurance agent or an insurance broker who's already familiar with your state's laws.