Liability insurance explained

With the number of types of insurance coverage available, it can be confusing as to what coverages you need, what are required by your state, or what exactly is covered, especially for younger drivers. Here we'll take a look at car insurance liability coverage. Liability coverage pays for damage that you cause to other drivers and passengers in an accident and is made up of 3 separate components: bodily injury (each person), bodily injury (each accident) and property damage. Bodily injury coverage pays for injury or death you cause in an accident and property damage covers vehicle and property damage. In total, liability insurance is used for any situation in which you are found liable for damage caused to someone else.

Bodily injury liability coverage
Bodily injury liability insurance covers the cost of any injuries or the death of a person as a result of an accident you cause. A few examples of coverage would be loss of income, medical and hospital bills and pain and suffering damages. In the event you are in an accident that results in a lawsuit it is important to have enough liability coverage to handle any judgment levied against you. It is important to note that bodily injury insurance covers the victims of the accident, but it does not cover your medical bills. It is extremely important to carry enough liability coverage because you would be responsible for any damages that exceed your insurance policies limits.

If people are injured in an accident that's your fault, bodily injury liability coverage helps protect you from bills that can include: emergency aid at the scene; medical expenses for bodily injury, sickness or disease that result from the accident; compensation for loss of income and funeral expenses.

Property damage liability coverage
Property damage liability insurance covers damage that you cause to the property of another individual. If another driver's property is damaged in an accident that's your fault, property damage coverage can help pay for such things as structural damage, repair or replacement costs for other stationary objects or vehicle repair or replacement costs. Property damage auto insurance coverage can also help keep your assets safe in the event of a lawsuit resulting from a covered accident.

How much liability insurance is necessary?
The answer to this question is simple: can you pay for the damages resulting from an accident if you are found legally liable for causing them? If the answer is no, liability insurance is a good idea, as you will be responsible for any amounts above what your insurance policy will cover. While you can purchase the minimum level required in your state, the safest bet is to purchase the most auto liability insurance coverage your budget can afford; it can often be the most valuable money you'll spend if you're ever in a serious accident.

Sources: insure.com; consumerreports.org