Auto liability insurance is required in most states. It covers medical bills and the property of others in the event that you are negligent behind the wheel and cause an accident.
While liability insurance only pays out to others, its purpose is to protect both you and those you may hit. Would you have enough money on hand to pay $10,000 to fix the back end of someone’s car? Fortunately, if you have the state-mandated liability insurance, you don’t have to worry about that!
There are two parts to Liability Insurance: Bodily Injury and Property Damage.
Bodily injury is any bodily harm, sickness, disease, and death that is physically manifested and tangible. In other words, it covers others for medical injuries you may cause as result of an accident.
In most Automobile Insurance policies, Bodily Injury is listed in two parts. The first number (as seen below) is the amount your insurance will cover “per person” in an accident, and the second number is the total amount your insurance will cover “per accident”. Most policies look something like this:
The first number ($25,000) is the maximum amount your insurance company will pay for one person in an accident you cause.
The second number ($50,000) is the maximum amount your insurance company will pay for the total amount of bodily injury that results from a single accident.
Suppose you are involved in an at-fault accident where two people are injured and need to go to the hospital. Each person sustains injuries amounting to the totals listed below:
In this Scenario, Person One would get all of his medical bills paid for, because his total was under the $25,000 per person limit. Person Two, however, sustained injuries that were above the limit your insurance company is liable to pay ($25,000).
The total amount that your insurance company would pay in this situation is: $14,000 + $25,000 (maximum amount for Person Two) = $39,000.
If Person Two wanted to get the remaining $12,000 in medical bills paid for, he would have to come after you personally for it, as the limits of liability on your car insurance had been reached.
Property damage is defined as the destruction or loss of use of tangible property such as the actual car itself. In most automobile insurance policies, Property Damage is listed at the tail end of the Bodily Injury section or in its own section. For example, many times it can look like this (the last number):
The first number ($25,000) and the second number ($50,000) are the bodily injury liability amounts we discussed above.
The final number ($25,000) is the maximum amount your insurance company will pay for damage to the property of others, in most cases another vehicle.
Suppose you are at-fault in an accident where you cause $19,000 of damage to another driver’s car and $7,000 damage to your own car.
Your auto liability insurance will cover the full $19,000 for the damage to the other car because it is below the $25,000 limit listed above.
The $7,000 damage to your car is not covered by your auto liability insurance. Whether or not your insurance will pay for the damage to your car depends on whether or not you have Collision Coverage.
