Understanding Auto Insurance Liability

Car Insurance Coverage to Pay Medical and Collision If At Fault

Mar 23, 2009

Auto insurance liability pays medical and collision expenses for the other driver if at fault in an auto accident. Here's how it works and why it's so important.

Auto insurance liability isn’t something people talk about every day. However it is a very important auto insurance coverage for many reasons, the least of which is that it is mandatory in all 50 U.S. states in some form or another.

Understanding Auto Insurance: What Is Liability?

Auto insurance liability simply means the driver’s legal obligation to pay for damages when at fault in an auto accident or other situation where bodily injury and/or property damage is incurred.

The driver’s auto insurance pays up to the amount set by the driver as reflected in the auto insurance policy. Types of liability coverage include

Depending on the auto insurance company, auto insurance liability coverage may be either combined into one single coverage or split between bodily injury and property damage.

Most states require drivers to carry minimum liability coverage which covers the driver’s legal responsibility to pay for others’ medical expenses and/or property damage when at fault in an auto accident.

Understanding Auto Insurance: Why is Liability So Important?

Auto insurance liability is important for many reasons. The most important reason is that it protects the driver financially if he or she is found legally responsible for causing injury to another person or their property.

Liability coverage cannot be eliminated, however it can be reduced to save the driver money on auto insurance. If the driver elects to reduce liability coverage, he or she should be aware of the risks.

Some auto insurance experts recommend that drivers maintain a liability limit of $1 million. While that figure seems outrageously high, consider the following scenario:

Many drivers hear the call to maintain a higher liability limit, but want to believe something like the above scenario will never happen to them. Maybe they are right; but maybe they’re wrong. It is simply a matter of managing risk.

Understanding Auto Insurance: Liability and Rental Car Scenario

One of the most common decisions drivers face when renting a car is whether to accept the rental car company’s offer for liability coverage. Meaning, if the driver is found at fault in an auto accident with the rental car, who pays for damages.

In most cases, liability auto insurance is extended to rental cars for those who are already covered under their own auto insurance. Thus, accepting liability auto insurance coverage while in the rental car office is simply adding an unnecessary expense.

However, drivers renting cars should always check with their auto insurance company first before renting the car to make sure liability extends to rental cars under their auto insurance policy.

Understanding Auto Insurance: The Bottom Line on Liability

Many drivers see the term “liability” on their auto insurance and have no idea what it means or how important it is for financial protection in the case of bodily injury and/or property damage.

But taking the time to understand auto insurance liability, why it’s important, and scenarios where auto insurance liability may be helpful aids in underscoring the value of this auto insurance coverage.

The copyright of the article Understanding Auto Insurance Liability in Automotive Insurance is owned by Daniel Gansle. Permission to republish Understanding Auto Insurance Liability in print or online must be granted by the author in writing.