Liability Insurance


What is liability insurance?

If you are legally accountable for injuries or property damage in an automobile accident, auto liability insurance will cover you. Instead of paying for another person's medical costs or automobile repair out of pocket, your insurance will cover some or all of the injured party's expenditures dependent upon your coverage limits. Every auto insurance policy includes liability coverage, which is needed in nearly every state.


What do liability insurance limits mean?

Your liability coverage will be split down into three different figures that represent your responsibility limitations for physical injury and property damage. You can select the minimum limits required in your state or greater coverage. In Pennsylvania, for example, the minimum limits for auto liability are $15,000/$30,000/$5,000. A common limit selected is $50,000/$100,000/$50,000 Here's what these figures mean:

  • Bodily injury per person: The maximum amount your insurance carrier will pay out for injuries per person is $50,000 USD.

  • Bodily injury per accident: The maximum amount your insurance will pay for injuries per accident is $100,000.

  • Property damage per accident: The maximum amount your insurance will pay out for damage to someone else's car or property per accident is $50,000 per accident.


Consider the following two examples:


Example 1: You collide with another driver, causing $30,000 in injuries and $20,000 in property damage. Because all injuries and damage fall within your coverage limitations, your insurer should pay both sums.


Example 2: You are at blame in a vehicle accident, but the situation is compounded by the fact that you wounded the driver and two passengers. All three have injuries of $40,000, for a total of $120,000. You may believe you are protected since you have $50,000 in bodily injury coverage per person. However, the maximum your insurance will pay out per accident depending on your policy is $100,000. You are now obligated to pay the remaining $20,000 in full.


What is covered by car liability insurance?

If you cause an accident and are at fault, your responsibility limitations pay for the losses and injuries you cause to others, such as:


  • Other vehicles' damage

  • Property damage (mailbox, house, street sign, guardrail, etc.)

  • Other drivers/passengers/pedestrians

  • Suits and legal/court expenses


Is it necessary for me to get car liability insurance?

Yes, almost every state requires car liability insurance. However, the quantity of coverage necessary varies greatly between states.


How much vehicle liability coverage do I require?

If you are found to be at fault in an accident, a court verdict may cost you your life savings, so be sure you are adequately insured. Add up your assets, which include bank, brokerage, and retirement accounts, as well as the equity in your house and other real estate. Subtract your loans from your entire net worth. As your overall net worth grows, consider selecting at least that amount for bodily injury liability. Keep in mind that physical injury claims are generally more expensive than property damage claims.


It is important to note that the cost of bodily injury liability varies according on the quantity of coverage and the driver, and the difference between the state minimum price and $100,000 is frequently little. Choosing greater liability coverage than is legally necessary is typically a sensible and popular decision. Generally, a majority of insurance buyers pick greater bodily injury coverage than their state requires, and more than half choose more property damage coverage than their state requires.


If you have a significant net worth, you should consider a combined single limit (CSL). If you have a lot of money, it could be worth it to get a car policy with a CSL that covers both physical injury and property damage. CSL values are typically between $300,000 and $500,000. A CSL policy has higher premiums, but your coverage limit can be divided in any way necessary to satisfy a claim against you.


For example, assume you have a policy with a split limit of $100,000 per person and $300,000 per accident. However, you create an accident in which you are accountable for $120,000 in medical bills for one person, leaving you liable for $20,000. Your insurance would pay the entire $120,000 if you had a combined single limit of $300,000, because your maximum limit of $300,000 applies to any sort of liability claim.