In most U.S. states, auto liability insurance coverage is a legal requirement for driving a car. Yet the most basic policy may not provide the coverage you need if you’re in a serious accident. It pays to understand liability car insurance and adjust your policy to meet your needs and budget.
There are two basic components of liability car insurance: bodily injury coverage and property damage coverage.
Bodily injury liability coverage may pay for harm to other people
Bodily injury liability coverage may help pay the costs if people are injured or killed in a covered accident you cause. This may include medical expenses, loss of income and, in some cases, legal fees if you are sued.
Property damage liability coverage pays for other people’s property, not yours
Property damage liability insurance helps pay for damage done to someone’s property as the result of a covered accident for which you are responsible. It may help cover the expense of repairing or replacing a car, fence or other property damaged during the covered incident.
Minimum limits on auto liability insurance may not provide enough coverage
A limit is the maximum dollar amount your insurance may pay per event. For example, if you have a property damage limit of $10,000 and cause $15,000 in damages in a covered accident, you are responsible for the excess $5,000.
If you carry only the state-minimum required liability car insurance with the lowest limits and you’re responsible for a bad covered accident, you would have to pay the balance of the claims that exceed your policy limits. It’s smart to select the highest auto insurance liability limits you can comfortably afford so you have adequate coverage if the unthinkable happens.
Required minimum amounts on liability car insurance vary from state to state
How much liability auto insurance you’re required to buy depends on the state where you reside. How much you buy beyond the legal minimum depends on your finances and assets. If money is tight, you might need to settle for state minimum limits, but it can be risky. If you have sizeable assets, you may want to consider higher limits, like those found in a personal umbrella policy that offers an extra layer of protection.
Auto liability insurance alone does not cover your car
If you opt for liability car insurance alone, you’re legally covered, but damage to your vehicle isn’t. That could cost you thousands to repair or replace the vehicle you depend on every day. Collision coverage and comprehensive car insurance coverage help pay for damage to your vehicle if coverage applies.
Auto insurance options can enhance your coverage
If you lend your car to friends for personal use, you need to make sure any accidents caused by them would be covered. Borrowed car insurance is a simple and inexpensive option you can buy with your auto liability insurance policy for extra protection. It may also provide coverage if you occasionally use your car for business purposes and are involved in a covered collision with another driver. Get the details from your actual policy.
If you don’t own a vehicle but borrow someone’s car longer than a month or rent a vehicle on a regular basis, you should buy non-owner auto insurance to help pay any claims if you are at fault in a covered accident.