What Is Liability Car Insurance and Why Do You Need It?
Auto liability insurance provides coverage for costs you are legally required to pay if you cause an accident, injury or property damage. If you are uninsured or underinsured, the costs associated with an injured party’s liability claim will come out of your pocket. To ensure that liable parties have the legal means to pay, every state in the U.S. has a minimum liability insurance requirement for drivers.
Whether the driver harms a passenger, a driver, a pedestrian, or a person’s property – and whether it is due to running a light, driving aggressively, or falling asleep behind the wheel – that driver may be found responsible for that accident. Talk with an independent agent in the Trusted Choice® network today, or get a free quote, and get the coverage you need.
By some estimates, distracted drivers cause 80% of accidents
18% of drivers say they regularly send or receive text messages while driving
36% of adult drivers report that they have read maps while driving
41% of drivers have set or changed a GPS system while driving, and 21% do so frequently
What Is Liability Insurance?
Liability is defined simply as legal responsibility for one’s acts or omissions. Liability insurance can cover people for things they neglect to do in addition to mistakes they make. With regard to car insurance, liability is nearly always associated with a driver’s actions. If you cause an accident, whether by driving aggressively, running a red light or not paying attention, you are responsible – or liable – for that accident.
What Does Vehicle Liability Insurance Cover?
If you cause an accident or cause injury to another person or their property with your vehicle, your liability insurance will help to cover your legal obligation, up to the limits of your policy.
There are two types of legal obligation:
Bodily injury liability: If you cause an accident that harms another person, your liability coverage would pay for “pain and suffering” claims, medical expenses including hospitalization and surgery and even lost wages for the injured parties, up to your policy limits. Bodily injury liability typically has two limits: one for each person injured, and one for the total injury costs of the accident.
Property damage liability: If you cause an accident that damages or destroys another person's car or truck, your liability insurance would pay for the repairs to the other driver’s vehicle, up to your property damage limit. Likewise, if you run into a building or drive into a hedge, your property damage liability coverage will cover the costs of replacing or repairing the damaged items.
Liability insurance also helps to cover the costs of lawsuits arising from an accident. For example, if an injured driver or passenger files a lawsuit against you, your liability insurance would help to pay for your legal defense. Note that you will likely need legal defense in court whether or not you are found at fault for the damages.
Your state. Each state has a different requirement for minimum liability insurance.
Your home and work. Where you live, drive and work makes a difference. A five-mile commute means that you probably will not risk as many accidents as someone with a longer drive. Living or working in a high-crime neighborhood can make you statistically more likely to be the victim of theft or vandalism.
Your driver profile. Your age and driving history are also taken into consideration with liability insurance. Statistically speaking, younger drivers are more likely to be in a serious accident. Motorists with a history of collisions and traffic violations are typically viewed by insurance companies as more likely to be in another wreck.
Liability Car Insurance Premium Limits
Your auto liability insurance coverage will typically have three limits: bodily injury for each person, bodily injury for all persons involved, and property damage. Your insurance company will pay up to that established limit. If costs exceed your limit, you will have to pay out of pocket.
If you have a 30/60/15 policy, this means your insurance company will pay up to $30,000 for one person’s bodily injury costs, up to $60,000 for all bodily injuries in the accident, and up to $15,000 for property damage.
Note that some insurance companies issue "single limit" liability policies, instead of split limit policies. A single limit policy would cover the costs of injuries and property damages together, up to the total limit. For example, a 300 policy would cover $300,000 of bodily injury and property damage liability combined after an accident.
Car Insurance Liability Example
If you cause a crash in which people are injured and the other vehicle is damaged or totaled, here is how your insurance would pay the costs if you have a 30/60/15 split limit policy:
Your liability insurance would pay up to $30,000 for any one injured person, including hospitalization, treatment and lost wages
It would pay up to $60,000 for all injury costs if multiple people have been injured
It would pay up to $15,000 for all property damage you cause
If the total costs of the accident amount to $100,000 for all injuries and lost wages, and $20,000 in property damage, the out-of-pocket costs you would be responsible to pay would be:
$40,000 in bodily injury costs
$5,000 in property damage costs
Totaling $45,000 out of pocket
Unfortunately, many people purchase only the minimum liability coverage required by their state, leaving them exposed to enormous expenses if they cause an accident. Be sure to talk with your agent about the appropriate amount of liability coverage for your financial protection.
You may also want to consider an "umbrella policy." which can provide excess liability coverage that can protect you if your legal responsibility in an accident far exceeds your auto liability coverage limits.
Based on your policy, you would have to pay $45,000 in out-of-pocket costs to cover your legal responsibility.
Get More Protection with an Umbrella Policy
An umbrella policy provides additional coverage beyond what you might foresee having to pay in accident and injury expenses. Umbrella liability kicks in when you have used up your auto liability coverage. Umbrella policies begin at $1 million in coverage.
Consider an example where you cause and accident and you owe $480,000 in damages, but your coverage is only $300,000. If you have an umbrella policy with a limit of $1,000,000, your policy would kick in once your liability coverage is exhausted. Instead of owing $180,000, you would use your umbrella coverage to pay that amount. This means no out-of-pocket costs to you, other than your policy’s deductible.
With increased healthcare costs and legal fees associated with lawsuits, umbrella policies are becoming increasingly important. Many drivers choose only the minimum liability coverage required by the state, leaving them vulnerable to additional out-of-pockets expenses when an accident occurs.
When you compare liability car insurance quotes, be sure to talk with your independent agent about how you can get the full protection needed to safeguard your financial wellbeing.
The Risks of Online Quotes and Coverage
Instant online quotes are made to be simple. Enter a few personal details, get a quote and choose a new insurance plan. But will you have the right protection when an accident happens — whether you or the other driver is at fault? Too often drivers discover the insurance plan they bought online does not cover their needs until it is too late.
Use online quotes to compare rates, but when you are ready to buy, talk to an agent. A local independent agent in the Trusted Choice network will work with you to compare plans from several auto insurance carriers, and help to ensure that you get the best policy for you at an affordable price. Get started with a quote now.