Let’s Take a Look at Liability Coverage
Liability coverage is one of those phrases that get tossed around rather frequently when a person signs up for car insurance. So much so, it sometimes becomes easy to gloss over what the phrase actually means.
We tend to be familiar with its basics: It’s typically just called “liability;” all 50 states require some sort of liability coverage; its primary function is to safeguard you from any damage that you may do to property or people in a car accident.
However, the full story behind liability car insurance coverage is a little more complex.
The Purpose of Liability Insurance
Essentially, the umbrella of liability insurance contains a trio of different components:
- Bodily injury per person involved in an accident
- Bodily injury per accident that occurs
- Property damage inflicted as a result of an accident
Each component plays its own role in covering the cost of damages that incur during an auto accident. In terms of bodily injury, these could include obvious costs such as medical expenses as well as costs that may not be identified as readily, including loss of income or legal fees in the event of a lawsuit. In terms of property damage, the costs covered could relate to car repair or replacement in addition to other expenditures like damages to a fence or a building.
Because there are three different components to liability car coverage insurance, the policy will typically come with individual coverage limits. These coverage limits are set by a minimum dollar amount that varies from state to state, although higher limits are typically available. When you’re shopping for liability car insurance coverage, you may see the value of each component pieced together like so: $25,000/$50,000/$25,000. Each dollar amount represents a component of the liability coverage. The first amount ties to bodily injury per person, the second amount correlates to bodily injury per accident, and the final amount relates to property damage. Even though these components are technically separate, since they all combine to shape a singular policy, these components cannot be piecemeal from different sources. In other words, you cannot just purchase the property damage piece from Allstate and obtain the components relating to bodily injury from another leading insurance carrier.
How Little is Too Little?
Obviously, the goal in having auto insurance is to never have to put it to use. Hopefully, you won’t ever have to do so. However, while it may be tempting to simply go with the state minimum when it comes to bodily injury and property damage, there is a bit of risk that is involved in that practice. For example, a minimum amount of liability coverage may be fine if you accidentally back into a lamppost, but it may not be if your accident involves serious injury or major property damage. When you are looking at a policy, it is important that you make sure you can afford not only its premiums, but any bodily harm or property damage that may not be covered due to the coverage amounts.
The Importance of Research
Even though looking for the right type of liability coverage can be tough, it’s one of the most important purchases you can make. As such, it is crucial that you get familiar with the basics of liability coverage, from how much protection you may have in the event of bodily injury and property damage to how the components of the policy work together. Having this knowledge may not prevent a car accident, but it will certainly minimize a lot of the figurative headaches that may come in the aftermath of a crash.