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Guide to Auto Liability Insurance Coverage

Guide to Auto Liability Insurance Coverage

Getting your vehicle insured isn't only a legal requirement in 49 of the 50 U.S. states (except for Florida), but it can also help reduce the financial burden of an accident. While more extensive insurance policies can offer ways to cover the damage to your vehicle, medical bills, and coverage for specific situations like a lack of insurance on the other driver's part, liability insurance is more limited in scope.

What is Liability Car Insurance,
and What Does Liability Insurance Cover?

Liability Car Insurance is a type of policy meant to cover the financial aspects of an accident or collision. As the most basic form of coverage, liability insurance will usually only cover the absolute minimum required by the law. Car liability insurance can include, but isn't limited to:

  • Any injuries resulting from a collision or accident to another party (where you are at fault)
  • Any damage resulting from a crash or accident to another vehicle (where you are at fault)
  • Damage caused by your car to another person's property
  • Legal expenses for lawsuits relating to an accident

How much your insurance covers will depend on your insurer and the policy limits they have in place. Progressive provides an example on their site for policyholders in Illinois. For bodily injury liability insurance, $25,000 is the maximum that Progressive would cover for the other party's injuries (per person). However, the amount can only reach $50,000 per accident. Even if there are more than two people in the victim's car, there is a cap on the total covered. For property damage, the cap is $20,000 paid out for damage to the other party's property or vehicle (per accident).

What Types of Insurance Are There, Besides Liability?

While liability insurance is the minimum legally required by many states, you may want to get additional coverage. Other coverage types include:

  • Comprehensive: Comprehensive car insurance covers all damage unrelated to an accident, including damage resulting from fire, vandalism, theft, animals, civil disturbances, natural disasters, falling objects, and glass-related damage. Some lessors and lenders require you to have this insurance in addition to liability coverage.
  • Collision: While liability insurance covers the other driver in the case of an accident, collision insurance helps repair damage to the policyholder's vehicle. If your car is leased or loaned, your lender or dealership may require you to retain collision insurance and liability coverage.
  • Uninsured/Underinsured: In many areas, drivers will frequently illegally operate their vehicles without liability insurance. This means if you get in an accident and the other driver is at fault, you'll have a tough time getting your repairs covered. Uninsured/underinsured insurance remedies this problem, covering any vehicle damage or medical expenses resulting from getting in an accident with an uninsured driver.
  • Personal Injury Protection: Personal injury protection is like collision insurance for the driver instead of the vehicle; this type of policy covers any medical expenses (direct or indirect) after an accident. Twelve states require this insurance type in addition to liability coverage.
  • Medical Payments: Medical payment insurance is similar to personal injury protection but doesn't cover indirect injuries. So this would be expenses like hospital stays, doctor visits, x-rays, surgery, and any other medical bills directly relating to the collision or accident.

Auto Liability Insurance Frequently Asked Questions

What is the Difference Between Full Auto Coverage and Liability?

The main difference between full auto coverage and liability insurance is that liability provides the minimum level of coverage required by law. This means that, in the event of an accident, liability insurance will only pay out for damage to the other driver's vehicle or person; if you are at fault, you will need any damage to your car by yourself. On the other hand, full auto coverage will usually pay for the damage to both vehicles and possibly any medical bills associated with the accident.

Is Liability Cheaper Than Full Coverage?

Liability insurance will usually be cheaper than full coverage, depending on your state, what type of vehicle you drive, and what insurance company you choose. Liability insurance can be found at a more affordable price due to the reduced coverage; liability insurance only covers the other driver, leaving you to foot the bill for any damage to your vehicle.

Is Full Coverage Insurance Worth it?

When deciding between liability and full auto coverage, a good rule of thumb is the 10% rule. The 10% rule states that if your annual insurance premiums exceed 10% of your car's value, paying the extra money for full coverage is not worth it. So, for example, if your vehicle is worth $6,000 and you are paying more than $600 per year for additional coverage, it may not be financially wise to continue to keep that insurance policy.

How Much Does Liability Insurance Cost?

How much your liability insurance will cost will depend on a variety of factors, including:

  • Where your vehicle is driven
  • What type of vehicle do you plan to insure
  • The information contained within your vehicle history report
  • How long you have been driving
  • Your age, sex, and marital status
  • Your credit history

How much you'll pay each month will also depend on which insurance company you choose. Some insurers will offer special deals, especially to those with clean driving histories, good credit, or those who drive fewer miles each year.

Is Liability Insurance Good to Have?

For the most part, liability insurance is required by law (unless you live in Florida), so yes, it is good to have. Driving without insurance can result in a fine or suspension of your license. You may also have to deal with other legal and financial consequences, including covering the total cost of damages to another vehicle in the event of an accident. While it can be challenging to budget for the extra costs associated with insurance, they will save you hundreds or thousands of dollars if you cause a collision.

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