Liability Insurance Basics
A certain amount of liability car insurance is required in every state, except New Hampshire, which does not mandate a specific amount of insurance. Instead, drivers who wish to forego car insurance, must prove financial responsibility in accordance with the state’s insurance laws and regulations.
When you purchase and maintain a liability car insurance policy, it protects you against a catastrophic financial loss in the event that you are in an auto accident and are determined to be the at-fault driver. This type of insurance policy pays for the another driver’s auto accident-related injuries and for the repair or replacement of his or her vehicle.
For example, let’s say that you impact another vehicle because you were driving distracted. After an investigation into the accident, your insurance company determines that you are the at-fault driver. If you have liability insurance, your insurance carrier will pay for the other driver’s accident-related expenses and any injuries that occurred to the passengers up to your policy limits. You would be responsible for paying for your own car repairs and medical expenses.
Liability Auto Insurance Coverages
Liability auto insurance includes provisions for bodily injury, personal injury and property damage. Some states also include underinsured and uninsured motorist coverage in their liability insurance policies. When looking at your insurance policy, you will see a set of numbers separated by slashes, usually in the format of 30/50/10, that indicate your policy limits.
The first number indicates the maximum your car insurance company will pay for bodily injury for one person. The second number indicates the amount of money your car insurance company will pay for injuries to all of the occupants of the other vehicle. The last amount indicates the policy limits for property damage, which includes the repair or replacement of the other driver’s vehicle.
The Importance of Choosing the Right Policy Limits
The caveat to getting the right liability insurance policy for your vehicle involves choosing the right policy limits. You should choose policy limits that would cover most accident and injury scenarios, which means you may want to choose a policy that has higher limits than your state’s minimum insurance requirements. If you choose limits that are too low, you could still be sued by the other driver for the remaining amount of their vehicle repairs and medical bills. You car insurance agent should be able to help you choose car insurance policy the right limits for your local area and driving habits.
Determining When to Purchase a Liability Only Auto Insurance Policy
Drivers who drive older vehicles that aren’t worth much or who have recently paid off their car loans are free to purchase a liability only policy. If you are still paying money to a financial institution, your lender may not allow you to purchase an auto insurance policy that only includes liability. This is because the financial institution wants to protect their investment in the event that you default on your car loan. In order to determine if a liability auto insurance policy would be good for you, you can ask yourself a few simple questions.
- Do I own my car? - If your car is paid off, you are free to choose any type of car insurance policy as long as it meets your state’s minimum requirements because you are no longer beholden to the loan requirements of your lending institution.
- Can I afford to fix or replace my car in the event of an accident? - If you can afford to fix or replace your car if you get into a car accident, you may want to consider dropping your full coverage policy for a less costly liability policy.
- How much is my car worth? - If your car is only worth a few hundred dollars, and it’s paid off, it may not make sense to carry full coverage car insurance on your vehicle. This is because car insurance companies only pay for the repairs or replacement of your vehicle up to its per-accident value minus any applicable deductibles. If your are is worth $800 and your deductible is $500, you’d only receive a maximum of $300 for the repair or replacement of your vehicle.
Getting An Affordable Liability Auto Insurance Policy
In order to get a liability policy that meets your needs and your budget, you need to shop around. This means filling out quote forms and getting estimates from several different insurance companies. Once you have all your quotes, you can quickly compare them against each other. Just make sure to pay attention to more than the monthly premium amounts. Car insurance policies that are well below the market may have numerous detailed exclusions, or they may not meet your state’s minimum insurance requirements.