Auto insurance liability is the portion of an auto insurance policy that provides coverage for damages or injuries that you cause to another person or their property while operating your vehicle. It is one of the most important and mandatory coverage types. In most states it is required as it protects you from financial responsibility in case of an accident.
Liability insurance has two components, bodily injury liability (BIL) and property damage liability (PDL). Bodily injury liability covers medical expenses, lost wages, and other damages incurred by the other party if you are at fault in an accident. Property damage liability coverage pays for damages to the other party's vehicle or property.
As an example, if you are driving and hit another car, property damage liability coverage will pay for the damages to the other car. Bodily injury liability coverage will pay for the medical expenses, lost wages, and other damages incurred by the driver or passengers of the other car.
The amount of coverage you need will depend on several factors, including the state you live in and the value of your assets. In most states, minimum coverage levels are set by law, but it is recommended to have higher limits to fully protect your assets in case of a large claim.
Liability insurance is a type of third-party coverage, which means that it only covers damages or injuries to other people or their property. It does not cover your own damages or injuries. It's also important to understand that liability insurance does not cover all damages.
Liability insurance will not cover the costs of repairing or replacing your vehicle after an accident or damages to you or your passengers. For that, you would need to have other types of coverage, such as collision or comprehensive coverage. This is often referred to as “Full Coverage” insurance.
It's crucial to understand the concept of fault in an auto accident. Fault refers to who is legally responsible for the accident. If you are found to be at fault, your liability insurance will cover the damages or injuries to the other party. However, if you are not at fault, your insurance company may pursue the at-fault party's insurance company to recover the costs of the claim.
It's important to note that liability insurance only covers damages or injuries that occur while you are operating your vehicle. If you lend your car to someone and they get into an accident, your liability insurance will still cover the damages as long as you were the owner of the vehicle at the time of the accident.
It's important to have enough liability insurance coverage to fully protect your assets.
If you cause an accident and the damages exceed your coverage limits, you may be responsible for paying the remaining costs out of your pocket. The potential result is the loss of your savings, investments, or even your home.
Working with your professional agent to ensure you have the right coverage is the best way to make sure you are covered properly.