Automobile insurance is intended to safeguard you and your automobile in the event of an accident, a break-in, theft, vandalism, or natural catastrophe. If you are found to be at fault in an accident that results in someone else being hurt or having their property damaged, your policy’s personal liability coverage will protect you. With the exception of New Hampshire, every state has a minimum level of liability insurance that you must buy when insuring a car.
Personal Liability Insurance, What Is It?
Car insurance policy may include a variety of coverage options, such as:
- Bodily injury liability
- Property damage liability
- Personal injury protection
- Collision coverage
- Comprehensive coverage
- Uninsured/underinsured motorist coverage
The liability coverage of the insurance is represented by the first two items on that list, bodily injury and property damage.
If you cause an accident and are at fault, your bodily injury liability coverage, or BI, will pay for the physical injuries to another person. So, for instance, if you rear-end someone with your automobile and they develop neck and back discomfort that necessitates an X-ray or continuous therapy, depending on your coverage levels, your bodily injury liability policy may pay for some or all of those costs.
If you cause an accident and are found to be at fault, property damage liability coverage, or PD, pays for damage to other people’s property. The car of a third party as well as other property, including fences or buildings, may be covered by this policy. The cost of restoring the damage is partially or fully covered by this kind of liability insurance.
What Are The Limits of Personal Liability Insurance?
Every state, with the exception of New Hampshire, establishes a minimal level of personal liability insurance that drivers must carry. You could find one of three possible liability limitations on your insurance, depending on the laws in your state:
- Bodily injury liability limit per person
- Bodily injury liability limit per accident
- Property damage liability limit
Bodily injury liability limit per person
If you cause an accident and are at fault, your automobile insurance carrier will only contribute up to the bodily injury liability limit per person to the medical costs of others. So, if an accident causes physical harm to another individual, you could be covered up to $25,000 per person.
Bodily injury liability limit per accident
The most your insurance provider will contribute toward accident-related medical costs is the bodily injury liability limit per accident. Let’s suppose that your per-accident bodily injury liability limit is $50,000. No of how many individuals were hurt in the accident, it is the maximum amount your insurance would cover for medical costs.
Property damage liability limit
If you cause an accident, your insurance company will only contribute up to your property damage liability limit in order to cover property losses. It’s normal to see these figures presented in an abridged style if your policy covers all three forms of liability insurance. It may be written on your policy as 100/300/50, for instance, if your bodily injury liability limits are $100,000 per person, $300,000 per accident, and $50,000 for property damage.
Why Do You Need Personal Liability Insurance?
The purpose of personal liability insurance is to shield you from significant financial damages linked to an accident that you caused. If you don’t have bodily injury liability coverage and cause someone to get hurt in an accident and incur a $50,000 medical bill, you would be liable for paying it out of pocket. And if you are unable to pay, you risk being taken to court.
Your insurance policy’s additional coverages have different functions. For instance, collision insurance covers damage to your automobile after a collision. Damages from falling items or other non-accident-related causes can be covered under comprehensive coverage. Additionally, if you are wounded in an accident, medical payments coverage will cover your own medical costs.
How Much Liability Car Insurance Do I Need?
Generally speaking, you should get adequate liability insurance to protect your assets up to the amount you would lose in a lawsuit. This is why:
Let’s imagine you purchase the 15/30/5 minimum required by your state for auto liability insurance, and you cause an accident that results in several injuries and $100,000 in medical expenses. Your insurer will cover $30,000, leaving you to pay the remaining $70,000.
Consider purchasing an umbrella insurance policy to provide adequate liability coverage. A million dollars and more in excess liability protection is offered by umbrella insurance. Umbrella insurance comes in once your liability auto insurance has run its course. According to the Insurance Information Institute, a $1 million policy may normally be purchased for between $150 and $300 a year.
How Much Personal Liability Insurance Should You Buy?
Your liability insurance must, at the very least, adhere to your state’s regulations. The sum you will pay for this insurance depends on a number of variables, including as the policy’s coverage limits and your driving history.
The minimal coverage standard in several states is 25/50/25, which means:
- $25,000 bodily injury liability limit per person
- $50,000 bodily injury liability limit per accident
- $25,000 property damage liability limit
However, a variety of factors, including your financial capabilities, might affect whether such restrictions are enough.
Let’s say you create an accident that results in three persons becoming hurt. Their medical bills amount $75,000 in total. If your bodily injury liability limit is $50,000 per accident, you would be responsible for paying the remaining $25,000 of their medical expenses out of your own pocket.
Having additional personal liability insurance coverage might assist you avoid having to make significant out-of-pocket payments following an accident. However, bear in mind that raising your coverage limits will result in higher premiums. Your insurance agent might be able to advise you if you’re unclear of how much personal liability insurance to get.
When you cause a car accident that results in property damage or personal harm and you are at fault, liability insurance covers the victims. If you are sued as a result of an automobile accident, liability insurance also covers the expenses of the defense. These expenses cover your defense attorney as well as court awards and settlements.
Sage is a financial/consumer journalist and senior editor, personal finance, of TrendsHQ. EXPERTISE: Personal Finance, Careers, Jobs, Scholarships, and Entertainment.