When you find yourself in a car accident with another driver that you are at fault for, they may ask the golden question, “do you have insurance?” They ask this because they expect any injuries or car damage they sustained to be entirely covered by you. This is a job for your liability insurance.
It’s not unheard of that you are responsible for all the damages you cause to another driver in an accident. In fact, it’s legally required in every state except New Hampshire. By mandating a minimum required liability coverage, uninsured drivers are kept off the road. Most drivers carry it and may buy more than the minimum that the state requires. More so, liability insurance also covers you in the event of a lawsuit. The main thing to remember about liability coverage is that it only covers the other driver’s expenses. It’s not about keeping your property insured, but rather the financial responsibility of repaying damages that you caused.
There are a couple of different types of liability insurance and different minimum limits. Here, we’ve created a handy guide that will take you through knowing the different liability coverages, how much is required, the cost, and knowing when you are overspending or under-spending.
What are the types of liability insurance?
Before diving into the specifics of what liability insurance covers, it’s crucial to explain the different types of liability policies. When it comes to liability insurance, there are two categories that it’s broken into. Both categories are legally required.
- Bodily injury liability insurance – Bodily injury coverage doesn’t cover injuries you sustained in an at-fault collision; it covers the injuries of the other driver. Specifically, it insures you against any medical fees or legal fees you may face after an accident.
- Property damage liability insurance – Property damage coverage pays for the damage you caused to another’s property –usually their car in the case of an auto collision. Any other property like a building or roadside sign, or lamppost is covered under this policy, though there may be limits.
What does liability insurance cover?
Talking about the bodily injury and property damage liability insurance has probably given you an idea of what a policy of this type covers and doesn’t. With these in mind, here’s how being covered by your liability insurance would typically work. You’re involved in a car accident that was due to a mistake on your part. Let’s say that the other driver’s car hasn’t been totaled, but the damage to the front is considerable. At the same time, the driver sustained a bruised torso and injured their arms while holding onto the wheel.
Right off the bat, your liability insurance would kick in. The repair costs required to fix the front of their car would be covered by your property damage liability policy. Meanwhile, the medical fees, lost wages, and even trauma is covered by your bodily injury liability. Getting into a car accident and having to pay any associated damages without the help of insurance can be expensive. It can even cost hundreds of thousands of dollars in some cases. Liability insurance can insure you up to these amounts based on your coverage limits.
What are the coverage limits of liability insurance?
The amount which your insurance company will pay under your liability insurance is determined by the coverage limits, which you are able to customize and set to your liking.
There are minimum requirements for property damage and personal injury:
- Bodily injury liability per person – This is the limit for how much your insurance company will cover each person in the other driver’s car in the event of a collision. The minimum limit for this is typically listed as $25,000.
- Bodily injury liability per accident – Still included in the bodily injury liability is the per accident limit. This is how much the insurance company covers the auto damage you caused to the other driver’s car. The minimum limit for this is usually $50,000.
- Property damage liability – The property damage portion of the liability insurance covers instances of vehicle damage or collateral damage that may have resulted from the accident. The minimum limit that insurance companies list for this is $20,000.
Truthfully, the minimum limits for each liability coverage vary from each insurance company. A good way to remember the average limits when shopping for liability insurance is “25/50/20,” with the first two numbers representing the bodily injury, and the third is the property damage limit.
What does liability insurance cost?
Liability insurance cost, monthly or annually, depends on the state you reside in. Other personal details like your zip code, sex, marital status, and car make and model can also have an effect on the quote an insurance company may give you. The average cost of full auto coverage in the United States is around $1,134, which is $95 monthly. However, just the liability insurance costs an average of $611 to $720. That’s around $55 to $65 monthly. This includes both the personal injury and property damage policies.
Liability insurance isn’t a special-case policy. The general population of drivers all carries liability insurance. Liability coverage is one of the least expensive auto insurance when it satisfies the minimum requirements. Adding on full coverage can increase your annual costs by more than 51%. Full coverage bundles the standard liability insurance with comprehensive and collision so that you and your car are financially covered in an accident.
When it comes to your yearly premiums, the amount of liability insurance you buy per accident, per person, and property damages determines how low they may be. Suppose you were to purchase $30,000 as opposed to the $25,000 minimum requirement for liability per person. Because you’ve paid more than the required amount, you may be eligible for lower yearly rates.
What kind of coverage levels are available for liability insurance?
25/50/20 is the magic number, but those are only the minimum amount you can pay. Remember, the first number ($25,000) is to the liability coverage per person, the second number ($50,000) to the liability coverage per accident, and the third number ($20,000) is to the property damage. The monthly cost for these limits would be approximately $59. The more insurance you buy, the higher your monthly fee will be.
To give you more of an idea of the pricing, here are a couple of more liability coverage limits and their average monthly cost:
- 50/100/25 – If you were to set your limits double the minimum amount –$50,000 per person, $100,0000 per accident, and $25,000 in property damage– the monthly cost would remain in the same range as $60.25
- 100/300/500 – With $100,000 per person, $300,000 per accident, and $500,000 in property damage, you would see a monthly liability insurance bill of $64.50.
What is uninsured/underinsured liability coverage?
If you were to become involved in an auto accident with a driver who doesn’t carry insurance, even when they are legally required to, they would have to pay out of pocket, which is easier said than done. Or, maybe they do have insurance, but their limits aren’t high enough to cover the damage they’ve caused you. Another type of liability insurance that sometimes comes bundled with your coverage is uninsured or underinsured motorist insurance. There are a couple of states like California, Oregon, and New York that require this type of insurance in addition to their liability minimums.
And much like liability coverage, there are different personal and property policies.
- Uninsured motorist bodily injury – Often called a “UMBI,” this covers your medical costs if you are injured on account of a driver with little to no liability insurance themselves. This can also cover you if you’re the victim of a hit and run.
- Uninsured motorist property damage – Also called “UMPD.” If you’re hit by an uninsured at-fault driver, the costs of repairing your car would be covered. This is the most important coverage you can have when it comes to uninsured drivers because you may already have insurance that covers you with an injury.
What is no-fault liability car insurance?
There are a couple of states like Florida, Minnesota, and New York that allow no-fault liability car insurance. There’s also legislation that comes with it. These states ruled that there is no need to identify the at-fault driver of a car accident in order for injury and property damage claims to be paid. The law dictates that both drivers file a claim with their insurance companies. This limits legal fees or lawsuits so that each driver’s damages can be paid for.
No-fault liability car insurance can be extended with what is known as residual bodily injury liability coverage. This is for situations where a lawsuit could become involved. No-fault liability policyholders are offered increased protection if multiple people are injured in a car collision, including bystanders, or in the result of a death. Residual bodily injury liability doesn’t offer complete protection from lawsuits.
Can you get liability insurance if you don’t own a car?
Liability insurance carries over to anyone else driving your car. So, if you need to drive a friend or family member’s car –you would be covered by their liability insurance. However, the coverage you receive would be extremely limited. You may be responsible for paying out of pocket for damages if the accident exceeds their minimum payout. Non-owner car insurance will provide you with the coverage you need when driving a car you don’t own and acts as liability insurance. This policy is for people who borrow cars frequently. Non-owner liability insurance acts as an add-on to the car owner’s current auto policy.
If you’re leasing or renting a car, then the leasing company that owns it may have its own designated liability insurance. Some rental companies may require you to buy full coverage for their vehicle. Those that just offer supplemental liability insurance often charge a lot for them and are limited in their protection. Supplemental liability can cost anywhere between $8 to $12 daily.
One more case where you may not own the car you want to insure is if you live in a household with a car that you use often. The wise thing to do would be to see if you can be added to their auto policy which would naturally include the required liability insurance. This is an efficient and easy way to make sure you’re insured, and it may also save you money.
Here’s what to remember about liability insurance
Liability insurance is necessary and legally required by most states in order to drive a car. Failure to carry the state minimum coverage can result in citations, fines, or having your driving privileges and license suspended.
When shopping or looking for liability insurance to satisfy your state’s minimum insurance requirement, it’s important to remember:
- Liability insurance only covers the other driver’s expenses in an accident that you caused.
- Property damage and bodily injuries are the only things it does cover.
- Buying more than your state’s minimum per person, per accident, and property damages are more useful in the long run as it could save you more.
- Keep in mind your car’s age and value when buying liability insurance.
Contact Insurance Navy today and receive a liability car insurance quote.