Loan & Insurance

Understanding auto liability insurance and why you need it

Especially if you were the one who caused the problem, car accidents can be very costly. When you cause another person damages or injuries in an auto accident, auto liability insurance can safeguard your finances by paying for those expenses up to the coverage level. This coverage is required by law in the majority of states.

why you need auto liability insurance

Let’s examine the many kinds of liability insurance, what they normally cover, how much liability insurance costs, and how each policy can differ. Well, in this article, the answers to the following questions will be discussed:

  • What is liability insurance?
  • What does liability insurance cover?
  • Does liability insurance cover my car if someone hit me?
  • Is liability insurance required by law?
  • How much does liability insurance cost?

Now let’s dive in!

Read more: Review on American Family auto insurance

What is liability insurance?

Auto liability insurance can assist in covering the other driver’s damage or injury claims if you’ve caused a car collision. The cost varies according to the region and coverage limits, and it is mandated by law in the majority of states. Property damage and bodily harm are the two primary types of coverage offered by liability insurance. Uninsured/underinsured motorist coverage, the third type of liability insurance, is also necessary for some areas.

What does liability insurance cover?

The table below shows what liability covers and they didn’t cover:

Covered Not covered
Other peoples’ medical expenses Your medical expenses
Other peoples’ property damage Damage to your car

 

The followings are the types of liability insurance and what they cover:

  • Property damage liability insurance
  • Bodily injury liability insurance
  • Personal injury protection
  • Uninsured and underinsured motorist coverage

 

Read more: How to get the best deal on car insurance?

Property damage liability insurance

Property damage liability insurance can assist in covering the cost if you accidentally damage someone else’s property. Depending on your coverage level, it might pay all or part of the damages if you hit another car or any other property, such as a tree or a fence.

Bodily injury liability insurance

What happens if you caused a collision and someone else gets hurt? There are tort insurance laws in many states. According to these laws, if you cause an accident and cause the other person’s injuries, you or your insurance provider are liable for paying the related expenses. Bodily injury liability insurance can aid in paying the victim’s medical bills in a state where tort insurance laws are in place. Other claims for damages, such as lost wages or pain, and suffering, might also be included.

The amount of liability insurance coverage is typically denoted on auto insurance quotes by a string of three numbers. The first two figures indicate the amount of bodily injury coverage offered. The third number indicates the extent of the policy’s property damage coverage.

Let’s say your policy’s coverage restrictions are 20/40/10 as an example. According to the first figure, the policy offers bodily injury protection of up to $20,000 for each injured party. The second figure indicates that $40,000 per accident is the maximum amount of bodily injury coverage. The third number informs you that the policy offers up to $10,000 in property damage coverage per accident.

Read more: Review of SafeAuto insurance

Personal injury protection

Things operate a little differently in states with no-fault insurance laws. Each driver’s insurer covers that driver’s post-accident medical costs, up to a set limit, in states where no-fault insurance rules are in effect. This is not a fault state, where the at-fault driver’s insurance company covers all medical costs, up to a certain amount, for both drivers and any passengers.

In certain of these states, drivers must also purchase personal injury protection or PIP. Regardless of who caused the collision, this coverage will provide a minimum amount per person for injuries to you or any passengers in your automobile.

Uninsured and underinsured motorist coverage

Some states may require uninsured motorist coverage and/or underinsured motorist coverage in addition to the other types of liability insurance that were previously covered. If you are involved in a hit-and-run accident or one that was caused by a driver who is not covered by liability insurance, uninsured motorist coverage might be able to assist with paying your medical bills or your vehicle’s repair costs.

What if the driver who hit you had insurance liability limits that weren’t enough to cover the harm you sustained? Up to the limits of your policy, underinsured motorist coverage might in this situation cover the difference between the driver’s liability limitations and the price of your losses or injuries.

Read more: How much car insurance do I need?

Does liability insurance cover my car if someone hit me?

In the event of an accident, your property damage liability insurance won’t pay for the cost of car repairs. Similar to this, if you get hurt in an accident, your bodily injury liability insurance won’t pay for your medical expenses. Instead, they aid in paying for any harm or losses you cause someone else in an accident.

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Your car’s damage and your medical costs should be covered by the other driver’s liability insurance if you weren’t at fault for the collision and live in a state with tort insurance regulations. No of who was at blame, each driver’s insurance provider in states with no-fault insurance legislation contributes to the cost of their medical bills.

Repairs may be paid for in one of two ways if your car is damaged due to your negligence. If the other driver is at fault, their property damage liability insurance may contribute to cost reimbursement. However, if you caused the damage, your collision insurance might pay for those repairs. You will have to pay out of pocket if you don’t have collision insurance.

Is liability insurance required by law?

In 49 states and Washington, D.C., liability insurance is mandated by law. New Hampshire is the only state that does not mandate liability insurance. Instead, if a driver in New Hampshire is at fault in an accident, they must demonstrate that they can pay for the costs of the accident out of pocket.

Personal injury protection and uninsured/underinsured motorist coverage are optional in some states and mandatory in others. To find out the minimal limitations needed in your state, contact the insurance commissioner or the transportation department.

Read more: How to compare car insurance rates?

How much does liability insurance cost?

The amount of coverage you decide to get will affect the price of your auto liability insurance. The cost may increase the higher your coverage limit. There are minimum coverage requirements in states where this kind of insurance is required. But if you want greater coverage, you can go over the minimum if you’re willing to spend more.

According to the Auto Insurance Database Report from the National Association of Insurance Commissioners, which was published in December 2018, the average yearly premium for liability insurance nationally was roughly $566 in 2016.

However, prices differ from state to state. Florida, New Jersey, Delaware, and Michigan paid much higher average premiums for liability insurance than other states on average. Others paid significantly less on average, such as Idaho, North Dakota, Alabama, and Iowa. However, bear in mind that factors other than the state in which you reside may have an impact on your auto insurance premiums.

Read more: How does auto insurance work in a no-fault state?

In summary

Make sure you are aware of the minimum liability coverage requirements in your state before purchasing a vehicle insurance policy. Examine your financial circumstances to determine if purchasing coverage above these minimums makes sense. Higher coverage limits are often more expensive upfront. However, if you cause an accident that leaves you responsible for a sizable amount of damage or serious injuries, a greater liability limit might end up saving you money.

You can decide the ideal level of auto insurance protection for your requirements with the aid of an insurance professional. Also, keep in mind that prices will change based on the insurance company you select. To get the best vehicle insurance plan for you, shop around and compare insurance rates.

That is all for this article, where the following questions are being answered:

  • What is liability insurance?
  • What does liability insurance cover?
  • Does liability insurance cover my car if someone hit me?
  • Is liability insurance required by law?
  • How much does liability insurance cost?

I hope you learn a lot from this article, if so, kindly share it with others. Thanks for reading, see you around!