Car insurance is required for all vehicles registered in the United States. Although insurance requirements vary from one state to the next, the minimum coverages are the same everywhere. Liability insurance coverage is one of them.
What is liability insurance?
Auto liability insurance covers you for injuries and damage caused by an automobile accident. There are two types in liability coverage.
- Bodily injuries liability covers other party’s injuries you cause when you are at-fault in an accident. This covers emergency care, medical expenses and lost wages.
- Property liability coverage covers property damage caused by you or another party if you are at fault for an accident. While vehicles are the most obvious example of damage, you can also include other types of properties such as buildings and fences.
Key Points Related to Liability Insurance
- Insurance provides protection from claims that result from injuries, property damage, and other losses.
- Liability insurance covers legal expenses and payments for which the insured party could be held responsible.
- These provisions do not cover Intentional damage, contractual liability, or criminal prosecution.
- Automobile insurance policies, product makers, and lawyers often require liability insurance.
- Types of liability insurance include personal liability, workers’ compensation and commercial liability.
How It Works
Liability insurance is crucial for people who are responsible and at fault in an accident that results in injuries to others or damages to another’s property. As such, liability insurance is also known as third-party Insurance. Liability insurance doesn’t cover intentional or criminal acts, even if the insured is found legally responsible. Anybody who owns a company, drives a vehicle, practices medicine, or law can get policies. The policyholder’s intentional negligence can cause injury to third parties.
Wealthy individuals, or people with substantial assets can only purchase personal liability insurance policies. But, anyone with a networth above the combined coverage limits for other personal insurance policies like home and auto, should consider this type of coverage. While additional insurance policies are not for everyone, many carriers offer lower rates when you purchase bundled coverage packages. Personal liability insurance, also known as secondary coverage, may require policyholders have limits on their auto or home insurance policies. These additional expenses could be incurred.
Also Know>> Highest Paying Insurance Jobs
Main Types Of Liability Insurance
- Employer’s Liability and Workers’ Compensation is mandatory coverage that protects employers against liability arising from injuries to employees or their death.
- Products liability insurance is offered to businesses that make products for sale on general markets. Product liability insurance protects against lawsuits stemming from injuries or death caused due to their products.
- Indemnity Insurance provides coverage to protect businesses from financial losses resulting in negligence.
- Directors and officers liability coverage protects a company’s board or other officers from liability in the event of a lawsuit. While corporations typically provide some protection to employees, some companies offer additional protection to their executive teams.
- Umbrella policies are personal insurance policies that provide protection against catastrophic losses. The coverage begins when other insurance’s liability limits are reached.
- The standard commercial general coverage policy is also known as comprehensive general insurance. It covers injuries sustained by employees and others, as well negligence and lawsuits. The policy can also be used to cover infringements of intellectual property, slander and libel. It can also provide coverage for tenant liability, employment practices liability, contractual liability, and tenant liability.
- Comprehensive general liability insurance is tailored for small and large businesses, partnerships or joint venture business, a corporation, association, an organisation, or a newly acquired company. Insurers cover bodily injury and property damage as well as personal and advertising injury, as well medical payments and premises liability. Insurers offer coverage for both compensatory and general damages, but not punitive.
What does liability car coverage cover & exclude?
Liability insurance protects you against liability in the event of an accident. It covers medical expenses as well as property damage to the other driver and passengers. Most states require liability insurance. Liability insurance covers are a way to prevent at-fault drivers or other individuals from having to pay large out-of-pocket costs. You also get some compensation for injuries or damage caused by you.
While auto liability insurance covers most costs related to an accident, there may be some expenses that are not covered. For example: Liability insurance does not cover intentional damage. Other costs depend on the type of insurance.
Also Know>> What Is Ho3 Policy & How Is It Different
What does bodily injury liability cover?
While every case is different, coverage for bodily injuries will typically cover the following categories:
- Hospital care and ambulance services for emergency medical needs
- Permanent medical expenses like doctor visits or rehabilitation
- Loss of wages
- Suffering and pain
- Funeral expenses
- Other legal expenses
It only covers your policy’s limits. You are responsible for paying the difference if the medical bills of the injured party exceed your policy’s limit on bodily injury coverage.
What does property liability insurance cover?
Property liability insurance covers:
- Vehicle damage
- It is the cost of renting a vehicle to replace the damaged one.
- Buildings, homes and businesses that are at risk of being damaged
- Structures such as mailboxes and fences
- Business revenue lost
- Other legal expenses
Your property damage liability policy covers you for any damage to other people’s properties. It doesn’t cover damage to your car or damage to vehicles belonging to family members living in the same house as you. You will need Collision coverage to help pay for repairs to your vehicle.
These expenses are all covered up until your policy limit. Even if you have liability insurance, any expenses that exceed your policy limit could be your responsibility.
How much does liability insurance cost?
The minimum coverage auto insurance cost in the United States costs $565 per year. Full coverage costs $1,674 each year. Car insurance costs will vary depending upon where you live.
Your insurance premium is determined by many factors.
- Your age
- What type of car do you drive?
- Your driving record
- Your ZIP code
- You choose which coverages you would like and what limits they will cover.
The price of liability-only car insurance can vary depending on these factors. There are a number of coverage levels you can choose from. Higher coverage limits can provide more coverage, but they will also increase your premiums.
Also Know>>What is gap insurance & when is it required?
What amount of liability insurance do you need?
Every person has different insurance requirements, but there are some guidelines which can help you ascertain the right amount of coverage that you need. If the charges exceed your policy limit then it could be your responsibility. The more assets you have, the more liability insurance you might need. It is always a good idea to speak to an insurance professional or licensed agent to determine the right coverage for you. Always consider these points to ascertain the amount of liability insurance.
Insurance laws in your state
The minimum coverage required depends on where you live and whether you are a tort or no-fault state. In a no-fault state, property damage, in addition to liability, and bodily injury coverage, a driver requires to have personal injury protection, medical payments, and uninsured/underinsured motorist coverages.
To legally drive, you will need to have at least the minimum liability limits in your state. These limits can vary from one state to another.
if you are a resident of Alabama, you must have at least $25,000 in bodily injury liability per person, $50,000 per bodily injury per accident, and $25,000 property damage liability.
These are the minimum coverages required. Insurance professionals will recommend you have higher liability limits if possible.
Take a look at your financial situation
For those with tight budgets, car insurance may seem unnecessary. You can save money by paying just a few hundred dollars per year for the minimum coverage. If you have already been sued before for damages caused by a car accident, your insurance premium could be much higher than the cost of your policy. You could face penalties from the state and lose your license if you don’t have auto insurance.
You could be considered a high-risk customer if you cancel your insurance or lose coverage. This will lead to higher premiums. It may be worth looking for affordable insurance and discounts in order to keep your premiums low.
Consider your net worth
Your net worth can influence how much liability insurance you need. You may need more liability insurance if you have assets such as a house or car, but not too much debt. This will help protect your assets and keep them from being taken into a court of law. To provide additional liability coverage, you may want to look into an umbrella policy.
Also Know>> What are the best homeowners insurance near you
The best providers of liability insurance
Every driver has different insurance needs so the best car insurer will be different for each one. These companies are ranked by market share and the discounts that they offer.
|Car insurance company||Average annual premium for minimum coverage|
Every provider listed has a discount available to reduce annual premiums. It is best to compare policies from different providers when shopping for car insurance. This will allow you to compare the prices and see who offers the best coverage.
What’s the difference between liability and other types insurance?
Liability insurance pays for medical expenses and damages that are caused to passengers and other drivers. But, it doesn’t cover for damage to your car. You can choose from a variety of coverages when purchasing auto insurance. There are two types of coverage: Property damage liability and bodily injuries. Also, you might want to purchase:
- Comprehensive Coverage – This pays to repair your vehicle if it is damaged by fire, weather, theft, vandalism or striking an animal.
- Collision Coverage – This covers damage to your vehicle from collisions and crashes with other vehicles or objects.
- Uninsured/underinsured motorists coverage: This coverage pays for damages to your property or vehicle caused by a motorist who has a small or no insurance coverage.
- Roadside assistance coverage This pays for expenses if your car breaks down and must be tow.
- Rental car coverage: These expenses cover your car while it is being repaired from an accident.
- Loan insurance: This covers the amount owed on a financed car if it is stolen or totaled before the loan has been fully paid.
There are many car insurance options. Each insurance company has its own range of coverages. It may be a good idea to speak to an agent to discuss your policy to help determine which coverages you should buy.
Frequently Asked Questions
How do you determine the right coverage for your car?
You will need to consider many factors when choosing the right policy of liability insurance. The minimum state limits are only one factor to consider. You may also want to consider buying higher coverage amounts, if you can. Discuss with your financial advisor and the insurance company what coverage is best.
What is the liability coverage for my car if I am hit by someone?
Liability insurance does not cover your car if an accident happens due to the fault of another car’s driver. Other driver’s insurance company is liable to pay for your damages. In such cases, your damages will be covered by the other driver’s insurance. You can also purchase uninsured/underinsured motorist insurance in case you are hit by a driver who does not have sufficient liability insurance. Collision insurance may allow you to pay your deductible, and your collision coverage will pay the rest.
What happens to my personal assets if I have liability coverage?
Your personal assets could be put at risk if an accident occurs in which the liability limit of another party is exceeded. A policy should have a limit that covers all of your net worth. You can purchase umbrella coverage if your liability insurance covers more than the limits of your auto and home policies.
What happens if I cause an injury and the other driver has a liability claim?
Your insurance premiums could increase if you are found to be at fault for an incident in which your insurance company paid for the damage of the other driver. You can keep your premiums down by obeying traffic laws and not driving in an accident-prone area. A few insurance companies also offer safe-driving programs, which track your driving habits and give discounts for good ones.
Also Know>> How does ordinance or law insurance saves you?