How Liability Coverage Works
The way to think about liability coverage is that it kicks in when you’re involved in a car accident and the accident is your fault—as in, you are liable for the damages. Liability insurance helps you pay for things that would normally cause you to go into years of debt or force you to sell your car or house to pay for on your own—unless you have tens of thousands of dollars sitting in the bank.
Here are the basics of auto liability coverage. You should know this through and through before purchasing an automobile insurance policy.
Property Damage Liability Coverage
When a car accident is your fault, it’s on you to pay for the damages you caused to the other person’s property—usually their motor vehicle, but sometimes fencing, landscaping, garages, mailboxes, and the like. That’s what the property damage portion of your liability insurance covers.
Bodily Injury Liability Coverage
If someone is hurt in a car accident you caused, your bodily injury liability insurance coverage pays the medical bills incurred during the accident along with other costs related to someone's personal injuries, such as lost wages and funeral expenses. If you get sued, this auto insurance coverage may cover your legal defense as well.
Coverage Limits
When you buy an auto insurance policy, your liability insurance comes with coverage limits. These limits are the maximum amount the insurance company will pay out to cover damages. After that, you’re on your own. So if you opt for the lowest liability limits, you’ll have the cheapest insurance, but you could be putting your assets at risk.
State Minimum Liability Coverage Insurance Requirements
The state minimum for liability insurance is whatever your state decides is the minimum amount of liability coverage you must carry. The state sets a minimum for bodily injury liability coverage per person and per accident, as well as minimum property damage limits. Some states also require personal injury protection, medical payments, and/or uninsured motorist coverage.
State Minimum Liability Coverage Insurance Requirements
State minimum liability insurance requirements are the minimum limits you can have on your policy and still be legally insured. They typically read in this format:
[bodily injury per person] / [bodily injury per accident] / [personal property]
For example, in Ohio, the state minimum insurance requirements are 25/50/25. That means your liability auto insurance has to have $25,000 in bodily injury liability coverage per person and $50,000 per accident, along with $25,000 in property damage liability coverage.
Other Types of Insurance
It’s really important to remember that liability insurance doesn’t pay for damage to your stuff or your medical bills. If you want to be covered regardless of fault, you will want comprehensive coverage, which covers damage from vandalism, natural disaster, theft, and other such calamities, as well as collision insurance, which protects you and your car when you hit things.
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