What is Liability Coverage, and Do I Need It?

Liability coverage in your insurance is coverage offered by insurance providers to cover the costs for injuries and property damage to other parties involved in an accident you cause. This means other drivers and their vehicles, pedestrians, and passengers in your vehicle. This also includes business property, such as store fronts, signs, displays, or personal property, such as homes, trailers, mailboxes, and more. It also means this coverage does not apply to your personal property or medical expenses for accidents where you are at fault.

Liability insurance is required in most states.

New Hampshire and Virginia are the only two states which do not require auto insurance, but drivers still have to pay for damages caused from an accident when they are at fault.

Each state has its own set of minimum requirements for how much insurance you must have. It is generally recommended to have more than that minimum amount to ensure you are fully covered with rising costs.

There are also different forms of liability insurance, the first two are commonly required in every state, but the latter two are not:

  • Bodily injury liability
  • Property damage liability
  • Personal injury liability
  • Uninsured/underinsured motorist

These cover various forms of “person” and “property”. Let’s break these down a little further:

Bodily injury liability (“BI”)

Bodily injury helps pay for an injured person’s medical expenses if you’re found at fault in an accident. It can also help cover legal fees if you’re sued.

Property damage liability (“PD”)

This coverage helps pay for repairs if you damage someone’s property. For example, if you rear-end another car, it can help pay for auto shop fees so you’re not stuck with the whole bill.

Personal injury liability (“PI”)

This coverage helps pay for medical expenses for yourself in an accident where you’re found at fault.

Uninsured motorist (“UM”)

This coverage helps pay for injuries and damages caused by an uninsured driver. Hit-and-run drivers are also considered uninsured motorists.

How is coverage defined?

It is important to know liability coverage is broken down further by these three categories:

  1. Coverage for injuries per person
  2. Total injury coverage per accident
  3. Coverage of property damage per accident

On your policy, this will appear as a series of numbers such as 25/50/25. The first number is the amount your insurance provider will pay out for injuries per person in thousands of dollars. In this example, it means $25,000 is designated for injuries per person. The second number in this example, 50, represents $50,000 total that the insurance company will pay overall for any injuries. Any amount over this total for injuries for the other driver and their passengers you will be responsible to pay.

The last number in the example represents $25,000 for that the insurance company will pay for damages you cause to property. This could be the car of the other driver, a building you hit, a fence knocked down in the accident, or other similar things.

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