There are various types of auto insurance coverage. Liability is the most important of all types of car insurance. A liability policy protects the policyholder’s assets in the event of an accident. When an accident occurs, the person at fault is liable for any damages caused by the accident. Without liability insurance, the car owner runs the risk of being sued for monetary damages of property and personal injury.
What is Auto Liability Insurance?
When the car owner is at fault for causing an accident, they are legally responsible for personal injury and property damage as a result of the accident. Auto liability insurance covers monetary damages when the policyholder is legally responsible for causing an accident. There are basically two categories of damages that liability insurance covers.
- personal injury liability
- property damage liability
Personal injury or bodily injury covers medical expenses sustained in an accident for the other party’s injuries. Other personal liability injury coverage can also include expenses like pain and suffering, lost wages and legal fees. Property damage includes the other party’s vehicle as well as any other damages like building structures, fences and signal lights.
Mandatory Car Liability Insurance
In the U.S. and Canada, most states and provinces require some form of car liability insurance. The type and maximum liability coverage can vary from state to state and from province to province. Certain states will allow a secured bond (for a minimum dollar amount) to be set aside in case of accident, in lieu of liability insurance.
Limitations of Auto Liability Insurance
Like most insurance policies, there are monetary limitations of liability insurance. The minimum in California for example is relatively low compared to most states at 15/30/5.
- The first figure is the maximum for a single injury at $15,000
- The second figure is the maximum for all injuries at $30,000
- The third figure is the maximum in property damage at $5,000
Medical costs and property damage expense can easily exceed limits placed on mandatory liability auto insurance. If the car owner’s net worth is considerably more than the mandatory minimums, they run the risk of a law suite for amounts above what the insurance policy covers. If the car owner has a lot of assets, they should consider liability insurance with higher coverage to cover those assets.
Besides the mandatory liability car insurance, there are other types of auto insurance coverage that should be considered. Liability insurance will not cover the car owner’s vehicle. If an uninsured motorist, who has little or no assets causes an accident, liability insurance will not cover injuries or damage to property.
James Clausen - Clausen received a Bachelors Degree in Business Administration in Automotive Management and Marketing at Northwood University, graduating ...
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