What is Liability Coverage?

            Auto liability coverage is a type of car insurance that helps cover the costs of injuries and property damage you may cause to others in an accident where you are found at fault. It’s often legally required by state laws and serves to protect other drivers, passengers, and property owners from financial loss due to your actions. Auto liability insurance typically consists of two components: bodily injury liability and property damage liability. Bodily injury liability is divided into two limits: the maximum amount your insurance will pay per person injured and the maximum amount it will pay per accident. For example, a common policy might have limits like $50,000 per person and $100,000 per accident, meaning your insurer will cover up to $50,000 for each individual’s injuries, with a total cap of $100,000 for all injuries resulting from a single accident. Property damage liability, on the other hand, covers the costs to repair or replace other people’s property that you damage, such as vehicles, fences, or buildings. A typical property damage liability limit might be $50,000 per accident.

            For example, let’s say you cause an accident that injures three people and damages a car and a storefront. The medical expenses are $40,000 for one person, $20,000 for another, and $50,000 for the third person. Your policy would cover the full $40,000 and $20,000 for the first two individuals. However, for the third person’s $50,000 medical bill, your policy would only cover $40,000 because your total bodily injury limit for the accident is $100,000. This means you would need to pay the remaining $10,000 out of pocket for the third person.

          Now for property damage, let’s assume that the other driver’s car requires $15,000 in repairs and the storefront’s damage costs $35,000. Your property damage liability would cover the entire $50,000, since it falls within your policy’s per-accident limit. If the total property damage had been $60,000, you would be responsible for paying the remaining $10,000 out of pocket. This example highlights the importance of setting adequate liability coverage limits to protect yourself from potentially high out-of-pocket costs in the event of an accident.