Liability insurance covers the driver of another vehicle if you have an accident which is your fault. It doesn't cover you, your injuries or your car. However, this can help protect you from being personally sued if you have purchased enough liability insurance to cover the other party's losses.
Liability insurance is required in every state except New Hampshire. If you get hit by someone else, and it's their fault, their liability insurance will cover the damage to your car and your medical bills. There are two types of liability insurance:
Bodily Injury Liability
Bodily injury liability covers the driver and occupants of another car if you cause an accident that results in injury. It does not cover the injuries you or your passenger suffered in the accident. Bodily injury responsibilities include medical bills, pain and suffering and wages lost by others as a result of being unable to work while recovering from an injury.
Property Damage Liability
Property damage liability insurance covers damage to other people's property, usually their car, but can cover items in the vehicle. If you drive to a building, property damage liability will cover the damage to the building up to the policy limit. You will need both types of liability insurance to protect yourself.
Liability Insurance Formula
The amount of liability insurance limit is given as three numbers separated by slash marks, for example, 50/100/50.
In this case, the first 50 means $50,000 and refers to the amount of body injury coverage per person covered by the policy. 100 means $100,000 of body injury coverage per accident. The last 50 refers to the amount of property damage liability per accident, which would also be $50,000.
Keep in mind that the responsibility of bodily injury is per person, while the responsibility for property damage is per accident. If you hit three people and three cars in the same accident, your insurance will cover you up to $100,000 for the physical injuries of the people you hit (maximum $100,000) and only up to $50,000 for all three cars. In this scenario, you will probably maximize the policy, and you will be responsible and may be sued for the remaining bills.
What Is the Cost of Liability Auto Insurance?
The average cost of liability coverage for a 50/100/50 policy is $864. If you increase full coverage, including collisions and comprehensives, the average cost is $1,270, or an increase of 31.98%.
However, if you add collision and comprehensive insurance to your policy, you and your vehicle will have an accident if you are at fault. This makes the additional cost of insurance feasible for most people. Collisions will cover the damage done from hitting something, and comprehensively cover damage from theft, weather, animals (such as hitting deer) and vandalism. If you have a loan on your vehicle, the financial company will ask you to bring collision and comprehensive insurance.
Do I Need Liability Coverage and What are the Minimum Requirements?
States vary in how much liability coverage they need, with most states needing at least $15,000 in body injury coverage per person, $30,000 in bodily injury per accident, and at least $10,000 in property damage. The policy will be read out 15/30/10. Some states also require uninsured rider coverage (UM), underinsured rider coverage (UIM) and personal injury protection (PIP).
States vary in how much liability coverage they need, with most states needing at least $15,000 in body injury coverage per person, $30,000 in bodily injury per accident, and at least $10,000 in property damage. The policy will be read out 15/30/10. Some states also require uninsured rider coverage (UM), underinsured rider coverage (UIM) and personal injury protection (PIP).
No matter your state requirements, you must have liability insurance or very deep pockets, as it is against the law in most states to drive without liability coverage. New Hampshire does not require liability insurance, but they do require drivers to prove they have some means of financial responsibility if they cause an accident.
How Much Liability Insurance Should You Buy?
The state's minimum requirement for liability insurance may not be enough to cover you if you cause an accident. You have to pay anything that is not covered by liability insurance, and medical bills can skyrocket very quickly.
Using Your Liability Insurance
This example illustrates how liability insurance is used and how not having enough liability insurance can cause you to pay out-of-pocket expenses.
Susan was on her way home from work and hit another vehicle. Another car was driven by a couple, Dan and Amy, with their son, Allison, in the back.
Susan has 50/100/50 in liability insurance.
And injured his back, and his medical bills totaled $30,000.
Amy broke her arm and suffered internal injuries. His medical bills cost $45,000.
Allison broke her leg, and her medical bill cost $7,000.
Amy broke her arm and suffered internal injuries. His medical bills cost $45,000.
Allison broke her leg, and her medical bill cost $7,000.
This scenario is covered by Susan's plan because all three people's injuries total $82,000, and Susan is covered up to $100,000 per accident.
By comparison, imagine there's a fourth person in the car, Tony, and Tony's medical bills total $40,000. Susan would then be on the hook to pay an additional $22,000 not covered by her liability insurance.
It also assumes no one in the car Susan is speaking to sue her for lost wages or pain and suffering. Medical expenses add up quickly and can easily bankrupt you.
What Isn't Covered by Liability Insurance?
Liability insurance is a pretty bare bone. It does not include options such as:
Collision (damage to your own vehicle).
Comprehensive (damage to your own car in any case other than an accident with another car).
Uninsured rider coverage (protecting you if someone without insurance attacks you).
Underinsured rider coverage (covers you if you're hit by someone who doesn't have enough insurance).
Personal injury protection (things like medical expenses and lost wages).
Comprehensive (damage to your own car in any case other than an accident with another car).
Uninsured rider coverage (protecting you if someone without insurance attacks you).
Underinsured rider coverage (covers you if you're hit by someone who doesn't have enough insurance).
Personal injury protection (things like medical expenses and lost wages).
That's Car Insurance and What It Covers. Good luck to you.
