Liability Coverage

What is Liability Coverage?

Liability coverage is a “third-party coverage”, meaning it covers other people (not you) for their injuries and property damage if you cause an accident. Even though it doesn’t cover your injuries or damaged property, liability coverage does protect you from being financially on the hook if you cause an accident.

Liability coverage is broken out into two main types – Bodily Injury (BI) and Property Damage.

What is the difference between bodily injury and property damage liability insurance?

Bodily injury liability pays, up to your policy limits, for injuries or death that you (the policyholder), or other drivers covered by your auto insurance policy, are found responsible for after a motor vehicle accident. Examples of what bodily injury will cover include:

General Damages:

Pain & suffering and mental anguish

Special Damages:

Measurable dollar amounts of actual loss (bills, work loss, etc.)

Who does bodily injury cover?

  • Third Party driver involved in the claim
  • Passengers
  • Pedestrians
  • Passengers in insured vehicle (except passengers who are insured on your policy, or who are family members living with you).

Bodily injury liability does not cover your injuries – it covers only the injuries of others that you are liable for.

The limits are broken out into two numbers (i.e. $25,000/$50,000)—the first number is the maximum your insurance will pay out per person and the second is the maximum amount your insurance will pay for all injuries suffered per incident.

Bodily Injury infographic

Property Damage covers you if your car damages someone else’s property. Usually it’s another car, but it could be a fence, house, or any other property damaged in an accident. It also provides you with legal defense if another party files a lawsuit against you. It’s the third dollar amount in the string of numbers you may hear when people are talking about the liability coverage limits (i.e. $25,000/$50,000/$20,000). Property damage liability does not cover damages to your vehicle—to have your vehicle covered, you would need collision and comprehensive coverage.

The per accident limit for property damage is the maximum amount that will be paid for all property damage resulting from any one auto accident. This is why understanding your limits is so important, because if you opt for minimum coverage or have lower limits, you’ll be on the hook for any outstanding costs after your limits cap out.

For example, in the state of Virginia, the minimum limit is $20,000. A quick Google search will tell you the average price for a new car in 2020 is around $40,000. If you’re rollin’ with state minimums and you total a new car, you’re looking at paying out-of-pocket for what your insurance won’t cover! The main point is that your limits aren’t about the value of your vehicle—they’re about the value of other vehicles on the road around you.

FAQs

Is Liability coverage required?

It’s required by law in most states.

What doesn’t liability cover?

Liability coverage doesn’t pay to repair damage to your own car after an accident. Collision Coverage will help with that. Comprehensive coverage will help pay for repairs to your car caused by other factors such as falling objects, vandalism, or hail.

If you currently carry lower liability limits, we recommend reviewing your policy and seeing where you can expand those limits. Any time is a good time, but particularly great times are whenever you experience a major life change that will affect who and what you need to cover (for example if you recently got married, you’re adding a teen driver to your policy, when you buy a home, etc.). It’s important to review your policy to make sure that you have enough coverage in case you’re at fault in an accident.

If you’re still unsure about how much liability auto insurance coverage to purchase, it’s worth noting that the more you purchase, the less you’ll have to pay out-of-pocket in the event that the injured party requires additional treatment if the liability coverage runs out. You may be legally responsible for paying those additional costs.  If you have a high net worth, you may want to increase your limits. Speak to a licensed agent to insure you are getting the coverage that meets your needs.

Did you know that there’s another type of liability coverage that can protect your financial assets in the event that you’re in an accident? An umbrella policy can provide coverage above what your car liability insurance covers in the event that you’re found at fault in an accident.


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