LIABILITY INSURANCE: Definition and Importance Author:    Posted under: Auto InsuranceAuto Insurance questions answeredAuto Insurance Types


It is common knowledge that in every thing we do we have a responsibility to uphold. Much is true in owning a car. Whenever we drive our car we are responsible for our safety as much as the safety of the other motorists we might come across with. Utmost care should be practiced all the time.

So, how do we protect ourselves from events that may happen when we are behind the wheel? By making sure that we have car insurance that will come to our aid should an accident happen. Having car insurance is not just something that we purchase just because we want to. Having car insurance is considered an obligation of every car owner/driver. Most, if not all states actually require all car owners to have car insurance. Car dealers often do not release cars without insurance.

There are different types of car insurance. The most popular of which is the Liability Insurance. It became the most popular because it costs much less than the others.

What is Liability Insurance?

Liability Insurance protects you from being responsible for the other party’s bodily injuries and losses. It’s simple as that. Whenever you figured or cause an accident, your car insurance will automatically take effect and pay for the injuries and damages to the other party.

Most states require a minimum amount of liability coverage but higher limits are also available. In fact, car insurance companies normally recommend that you get higher liability coverage. Thinking that you only need minimum coverage usually puts you at risk when an accident occurs. When that happens, your insurance will only cover the amount your premium paid for and you will get to shoulder the rest of the bill whereas a higher coverage will keep that from happening.

Liability Insurance has two sides: Bodily Injury Liability and Property Damage Liability.

As the term implies, in Bodily Injury Liability your car insurance pays for the injuries of the other party. It includes paying for medical bills and lost wages.

Property Damage Liability refers to the damages the other party’s car incurred due to the accident. It includes paying for the repair and parts replacement. The Property Damage Liability also includes damages done on other properties, such as poles, fences, that might have been affected by the accident.

Your liability insurance will also protect you from financial obligations should the other party sue you after the accident but again only up to the amount that your insurance covers.

Liability Insurance coverage is written in three numbers or sometimes referred to as Split Limits Policy. Let’s take this as an example: 25/45/15. The first number, 25, refers to the maximum amount payable for bodily injury per person- $25,000.00. The second number, 45, refers to the maximum amount payable by the policy per accident- $45,000.00. And lastly, 10, refers to the maximum payable to property damage incurred- $15,000.00.

If the total amount payable costs much more than your car insurance coverage you will automatically pay the difference. It is much safer to set a higher coverage amount than be put in a financial risk should an accident happen.

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