Auto insurance, such as liability car insurance, is an important aspect of responsible car ownership. It protects you financially in case of unforeseen events and accidents.
Liability car insurance is one of the most common types of car insurance which is required in most states. Liability coverage comes with most vehicle and property insurance policies, including auto and homeowners insurance. However, car insurance is auto liability coverage, and property insurance is personal liability coverage.
In this blog, Beem, America’s first Al-powered Smart Wallet App, will help you understand the details regarding liability car insurance, how it works and why it is important.
What Is Liability Car Insurance?
A liability car insurance policy covers damages or injuries to others when you are responsible for a car accident. This insurance is typically mandatory in most states. It is designed to protect the driver and passengers from the financial burden of an accident caused by your negligence.
It is often referred to as “third-party” insurance, covering the damages or injuries caused by you to other parties involved in an accident, not your own damages or injuries.
How Does It Work?
When you purchase liability insurance, you are buying coverage for damages or injuries you may cause to others while driving.
In most states, this type of coverage has become a legal requirement for drivers. State laws specify minimum liability coverage limits that drivers are mandated to carry in order to legally operate a vehicle on public roads. These minimum limits include two types of liability coverage:
Bodily Injury Liability (BI): This insurance covers medical expenditures, lost wages and other damages incurred by the other party if you cause an accident that results in them being injured. It also covers legal expenses if you are sued for damages.
Property Damage Liability (PD): This coverage helps pay for damage caused to other people’s property, including their vehicles, buildings and other structures.
Maximum Coverage Limits
Liability insurance coverage limits refer to the maximum amount an insurance policy will pay out for covered claims. This will also depend on the coverage limit you choose, as it changes from state to state. There are three liability insurance coverage limits:
1) Bodily Injury (Per-Person Limit): The per-person limit is the ultimate amount your insurance will pay for injuries to a single person.
2) Bodily Injury (Per-Accident Limit): The per-accident limit is the maximum amount it will pay for injuries to multiple people in a single accident.
3) Property Damage Limit: Similar to bodily injury liability, property damage liability has a coverage limit, which is the maximum amount you have chosen in your insurance policy. This limit determines the maximum amount your insurance company will pay for property damages caused by a single accident or incident.
Many insurance companies provide packages of both bodily injury and property damage insurance.
For example, your policy may look like this 30/100/20, which means a $30,000 BI per person limit, $100,000 BI per accident limit and $20,000 property damage limit.
There will be a fixed amount the insurance company will pay for both bodily injury and property damage claims. The limit applies to all claims arising from a single incident, regardless of whether they are bodily injury or property damage claims.
It’s important to note that once the liability insurance coverage limit is reached, the policyholder may be responsible for any additional costs beyond the coverage limit. And if you want coverage for your own damages or injuries, you would need to purchase additional types of car insurance, such as collision coverage or comprehensive coverage.
Why Is Liability Car Insurance Important?
Liability auto insurance is not only mandatory in most states but also essential for protecting your financial well-being in case of an accident. Here are some key reasons why liability auto insurance is a must:
Legal Requirement: In most states, this insurance is a legal requirement for drivers. You may face fines, license suspension or other legal penalties if you are caught driving in key states without proper liability insurance. It’s important to comply with your state’s requirements and carry the minimum insurance coverage to avoid legal repercussions.
Financial Protection: Car accidents can result in significant damages and injuries, which can lead to expensive medical bills, property repairs, and legal expenses. Without liability car insurance, you would be personally responsible for paying for these damages out of your pocket, which can financially drain you. This car insurance provides a layer of financial protection by covering the damages or injuries you may cause to others, helping you avoid potentially crippling financial liabilities.
Peace of Mind: Knowing that you have liability car insurance provides you a certain peace of mind while driving. Accidents can happen unexpectedly, and having the proper insurance coverage in place can help alleviate the stress and worry associated with potential accidents. With reliable auto insurance, you have the peace of mind that you are financially protected.
Protecting Your Financial Future
Liability insurance coverage plays a crucial role in protecting policyholders from financial loss due to accidents, injuries or damages caused by their actions. By understanding liability insurance coverage limits and their significance, policyholders can make informed decisions about their insurance needs and mitigate potential financial risks. If you have any questions or need further guidance on liability insurance coverage limits, consult a qualified insurance professional who can provide expert advice tailored to your situation.