Liability is a basic form of coverage delivered by the majority of car insurance policies. Comprehending the function of liability insurance can help you determine how much coverage you need in order to cover a loss that you are legally responsible for.

Liability Insurance Coverage

Auto insurance typically includes liability insurance coverage for those accidents concerning bodily harm and property damage that you are liable for. Put quite simply, this is the coverage that covers the cost of injuries and damages incurred by another driver (or their property) that you are liable for.

Insurance Covering Bodily Injury (BI)

If you are at fault in a traffic accident and a person gets hurt, liability coverage covers his or her injuries as a part of your auto insurance. State law often requires a specific minimal amount of liability insurance, but a higher limit is normally available if requested. Policies with divided limits (e.g. 25/50/10 or 20/40/15) of liability delineate the degree of insurance coverage offered for each injured individual and the amount set aside for the traffic accident itself. For instance, an insurance policy with divided limits of 20/40/15 indicates that $20,000 is the maximum amount covered by the policy for bodily harm per individual; $40,000 is the maximum covered per accident, and $15,000 is the maximum payable for property damage (see below for further details). Some insurance policies have a collective single limit (i.e. $100,000). Collective single limit policies have one amount that is the highest amount allocated for bodily harm and/or property damage.

Insurance Covering Property Damage (PD)

If you are at fault in a traffic accident and a person’s property is damaged, your auto insurance liability coverage offers compensation for the damage. In an accident, damaged property frequently includes the other motorist’s car. Nevertheless, property damage coverage also covers harm to other kinds of property, like signs or utility poles.

The third number in a divided limit policy specifies the largest amount allocated for property damage in each accident.

State-Required Minimums

There is no way to know beforehand how severe an accident will be, or to determine how many individuals will be involved or injured. For this reason, it is a prudent idea to carry a higher limit on your auto liability insurance than is mandatory under state law.

Can You Save on Liability Insurance?

These limits are certainly a way to save some money on your auto insurance, but you should be cautious about how low you decide to go. It is critical to learn whether your state has a required minimum limit for liability coverage and, if so, what it is in your area. Then you must determine if you can afford more liability coverage than what is required by state law.

Risks Associated With Saving On Liability

Paying less for your liability insurance sounds simple. The lower the limit is, the lower the monthly payment will be, right? Your first impulse may be to set those limits as low as you can. However, this also means that your policy will pay that much less should you be at-fault in an accident. For this reason, it is important to go over your budget and find out how much, if any, more you can realistically afford to spend. Paying a little more on your auto insurance may seem pointless right now, but paying several thousand dollars out of pocket if you have an accident would be that much worse.

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