Understanding Liability Coverage in Auto Insurance: A Simple Guide

Introduction

Welcome to Eagle Insurance, your trusted independent insurance agency based in Rhode Island, serving clients across New England. Auto insurance can be complex, but we’re here to simplify it for you. In this post, we’ll provide an easy-to-understand overview of liability coverage, one of the most crucial components of your auto insurance policy. We’ll explain what it is, what it covers, how it works and why its so important to understand it.

What is Liability Coverage?

Liability coverage is a fundamental part of auto insurance that helps protect you financially if you are found at fault in an accident. It helps cover the costs of injuries and damages to other people and their property. Liability coverage is often divided into two parts: bodily injury liability and property damage liability.

What Does Liability Coverage Include?

• Bodily Injury Liability: This part of the coverage helps pay for medical expenses, lost wages, and legal fees if someone else is injured in an accident you are found responsible for causing.

• Property Damage Liability: This helps cover the cost of repairing or replacing the other party’s vehicle or any property damaged in an accident you may have caused, such as fences, buildings, or other structures.

• Legal Defense Costs: If you are sued as a result of an at fault accident, liability coverage typically helps cover your legal defense costs.

What are Liability Coverage Limits?

Auto insurance liability coverage limits refer to the maximum amount of money your insurance company will pay for damages and injuries you may cause if found to be at fault in an accident. Liability coverage limits are typically shown as “split limits”. Split limits are typically expressed as three numbers, such as 100/300/50. Here's what each number usually represents:

• Bodily Injury Per Person (100): This is the maximum amount your insurer will pay for bodily injury to one person in an accident. In this example, it's $100,000.

• Bodily Injury Per Accident (300): This is the total maximum amount your insurer will pay for bodily injuries to all people involved in a single accident. In this example, it's $300,000.

• Property Damage Per Accident (50): This is the maximum amount your insurer will pay for property damage per accident. In this example, it's $50,000.

Having split limits allows you to see the specific coverage amounts available for different aspects of an accident, ensuring you understand the extent of your financial protection.

The Importance of Higher Coverage Limits

Help protect everything you’ve worked so hard for. One of the main reasons for getting higher liability coverage limits is to protect your assets. Liability coverage helps cover the costs of damage or injuries you cause to others in an accident up to the policies coverage limit. If you have low limits and cause an accident that results in significant damage, injury, or death to others, you could be held personally liable for any remaining costs above and beyond your coverage limits. This could potentially put your home, savings, and other assets at risk. Having higher coverage limits is an affordable way to help protect your assets and minimize this financial risk.

Increasing your coverage limits may not even cost much: Many people believe that higher liability coverage limits would be much more expensive than lower limits, but this isn't necessarily true. In many cases, the cost of increasing your liability coverage limits is minimal compared to the added protection it provides.

If you are looking for even more liability coverage, consider an Umbrella policy: An umbrella policy can be an extension of your auto or home insurance liability coverage. Depending on the type of policy you get, it can provide an additional layer of liability protection beyond what your regular home or auto insurance provides. Umbrella policies typically offer coverage in increments of one million dollars and can be used to protect your assets, such as your home, savings, and future income. If you are concerned about potential liability claims exceeding your auto or home insurance liability limits, an umbrella policy may be a good option to consider.

Key Points to Remember

• Mandatory in Most States: Liability coverage is typically required by law in most states.

• Financial Protection: It provides essential financial protection if you are at fault in an accident.
  

•  Does Not Cover Your Damages: Liability coverage does not cover your own injuries or damage to your own vehicle; it is solely for the benefit of the other party involved in the accident.

• Coverage Limits Matter: Choosing adequate coverage limits is important to protect your assets.

Important Caveats and Considerations

• State Minimum Requirements: Be aware of your state's minimum liability coverage requirements, which might not be sufficient in the event of a serious accident.

• Umbrella Policies: Consider an umbrella policy for additional liability protection if your assets exceed the limits of your auto policy.

• Policy Exclusions: Read your policy carefully to understand any exclusions or limitations that may apply

Conclusion

Liability coverage is a crucial part of your auto insurance policy, providing vital financial protection in the event of an accident. At Eagle Insurance, we’re committed to helping you understand your coverage options. To learn more or explore your coverage options, contact Eagle Agent today. We're here to help you make informed decisions about your auto insurance needs.