What Does Auto Liability Insurance Cover?

By Dayna Noffke

  • Overview

    Auto liability insurance is coverage that pays for damage to other vehicles in the event of an accident. It does not provide any restitution for repairs to your personal car. There are laws in every state requiring motorists to carry a minimum amount of liability insurance.
    What Does Auto Liability Insurance Cover?
    What Does Auto Liability Insurance Cover?
  • Definition

    Liability coverage is the part of your auto insurance that pays for damages to other's property, or bodily injury to others that occurs as a result of your operation of a vehicle. All states have laws requiring drivers to carry a mandated amount of liability coverage. Liability insurance does not pay for any medical bills for you or damage to your own vehicle. Liability coverage limits are three designated numbers that are separated by slashes, for example, 10/30/20. This translates into the amount of monetary coverage for bodily injury (one person, $10,000), total bodily injury per accident ($30,000) and coverage for property damage ($20,000). Liability coverage is the least costly component of your auto insurance package. Varying levels of insurance are available.
  • Warning

    Your liability for damages that you cause to others in an accident does not end with the amount of liability coverage that you have purchased. For example, if your liability limit for property damage is $30,000 and you cause $40,000 in damage, you are solely responsible for the additional $10,000 and can be sued for that amount. Courts can even seize your assets, including your home or vehicle, to collect the money owed.


  • Types

    Car insurance consists of five different types of coverage. Although liability insurance is required by law, you will have to decide what other types of coverage you need. Your answer will depend upon your individual financial situation and the degree of financial risk that is acceptable to you. Other types of auto insurance coverage include collision, comprehensive, medical payments and uninsured/underinsured motorist coverage. Collision coverage pays for damages to your car that are incurred as a result of a collision. Comprehensive coverage, in contrast, pays for damages that occur in a non-collision incident (for example, the cost to replace your car if it is stolen). Purchasing additional medical payment coverage will cover costs above what your liability pays, and uninsured motorist coverage covers your own damages in the event that the at-fault driver did not have insurance.
  • Considerations

    If you carry only liability coverage, you cannot recoup the cost of damages to your own car. Carrying collision and/or comprehensive coverage is a good idea if this is not an acceptable risk for you. For example, if you have only liability coverage, and your car gets stolen and is not recovered, you will be totally responsible for the cost of replacing your car. It is also important to realize that most insurance policies do not cover the real cost of replacing the car if it is totaled, but rather pay you the Blue Book value of the auto. Because of depreciation, this amount may be substantially less than it would cost to buy a new car. If this would be concern, speak to your insurance agent about purchasing additional coverage.
  • Purchasing Coverage

    There are numerous insurance agencies to choose from when you are purchasing liability coverage. Because all policies work essentially the same way and provide the same service, it pays to shop around for the most economical insurance policy that fulfills your needs. Agents will be familiar with the minimum insurance liability requirements in your state, and you will be required to purchase at least the amount of coverage that is required by law. The Insurance Information Institute (III) recommends, however, that you pay for the maximum coverage limits that your budget can comfortably allow. The simplest way to compare insurance coverage and rates is to go to one of the many websites that provides real time quotes from insurers. If you already have other insurance policies, such as homeowners or renters insurance, check to see if the company offers discounts for customers who combine auto insurance with other coverage.
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