How Does Liability Insurance Work?
When you get into a car accident, there are several things you should do to protect yourself and your property. One of the most important is to make sure you are carrying sufficient liability insurance.
Liability is a type of auto insurance that covers other people’s medical expenses and property damage costs when you’re found to be at fault for an accident. It also pays for your legal defense and any judgments or settlements that arise from a lawsuit filed because of the accident.
The exact types of losses that are covered by liability insurance vary from policy to policy and state to state, but in general the coverage pays for medical expenses, pain and suffering, lost wages and sometimes legal fees if the other party files a claim against you after an accident.
How Does It Work?
When you’re in an accident, the person who is at fault for the accident will file a claim with your liability insurance company. Your liability insurance company will then pay the other driver’s medical and property expenses up to the amount of your policy limit.
Bodily Injury Coverage
In a typical policy, there are two types of bodily injury coverage. The first is called “per person” coverage and the other is called “per accident” coverage. In most cases, this means that the maximum amount your policy will pay out is a set amount for each person that you hit in an accident.
Ideally, you’ll want to purchase the highest limits possible. Higher limits can help you avoid having to go to court and protect your assets in case a lawsuit is filed against you.
If you are a driver who does not own a vehicle, you may be required to carry the minimum level of liability insurance by law in your state. However, most drivers choose to add optional coverage to their policies to help ensure they have the necessary protection.
The amount of liability insurance you need depends on the value of your assets, how much you can afford to lose in a lawsuit and whether or not you live in a no-fault state.
How much is too little?
A driver should never buy less than the minimum level of liability insurance required by law. This is especially true if you have large assets that you would like to protect.
For example, a driver who owns a home and savings should consider purchasing more liability insurance than is required by their state. This could be up to $100,000 for each person in the accident or up to $300,000 in total.
What is the best way to determine what amount of liability insurance to purchase?
Many states require a certain amount of bodily injury and property damage liability insurance. Some states even require a separate policy for uninsured motorists, personal injury protection and MedPay.
What is a good level of liability insurance?
In a no-fault state, you are required to carry the minimum amount of liability insurance. But you can also get additional coverage to help offset any out-of-pocket costs that might arise if you’re involved in an accident with another driver.