Understanding Automobile Insurance Liability Coverage

Liability is one of the fundamental forms of coverage addressed in most automobile insurance policies. Understanding the purpose of automobile liability insurance will help you decide how much coverage is needed to cover losses for which you are legally liable.

Legally Liable
Automobile insurance can include liability insurance coverage for accidents involving bodily injury and/or property damage for which the policyholder is legally liable. In other words, liability protection is the coverage that pays for injuries and damage sustained by a third party and/or their property for which you are responsible.

Bodily Injury (BI)
If you cause an accident and someone is injured, your liability coverage as part of your automobile insurance will pay for their injuries. Minimum amounts of liability are often required by state law, however higher limits are usually available. Policies with split limits (i.e. 25/50/10) of liability separate the amount of coverage available for each injured person and the amount of coverage available for the accident. For example, a policy with split limits of 25/50/10 means $25,000 is the maximum amount payable by the policy for the bodily injury per person; $50,000 is the maximum payable by the policy per accident (the third number deals with property damage, which is discussed below). Other policies have a combined single limit (e.g. $100,000). Combined single-limit policies offer a single amount that is the maximum amount payable by the policy for bodily injury and property damage.

Property Damage (PD)
If you cause an accident and someone else's property is damaged, your automobile insurance liability coverage will pay for the damage. In an accident, damaged property often includes the other driver's vehicle. However, property damage coverage will also pay for damage to other types of property, such as a sign or light pole.

In policies with split limits (i.e. 25/50/10), the third number indicates the maximum amount payable by the policy for property damage per accident. Combined single-limit policies offer a single amount that is the maximum amount payable by the policy for bodily injury and property damage.

Some states require drivers to carry a minimum amount of liability insurance for property damage. Higher limits are usually available.

Is there any way to predict the severity of an accident or how many people may be involved before it happens? Because the answer to this question is "no," higher limits of liability are always recommended.

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