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  2. What Does Liability Insurance Cover?

What Does Liability Insurance Cover?

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Jeffrey Johnson graduated summa cum laude from the University of Baltimore School of Law and has worked in legal offices and nonprofits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman University and worked in film, education, and publishing...

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UPDATED: Nov 13, 2019

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What does liability insurance cover?

Liability insurance covers many claims including physical injuries to other people, pain and suffering, lost wages, damage to other people’s property, and legal costs to defend yourself as the result of an automobile accident.

Some examples of claims that would be covered by liability insurance are:

  • Backing into another vehicle in a parking lot (property damage)
  • Hitting a pedestrian in a crosswalk (bodily injury)
  • Backing into another vehicle giving the driver whiplash (property damage AND bodily injury)

Who is covered by my car insurance liability coverage?

Liability coverage extends to you, any family member, and any person using your vehicle. It also covers you as secondary insurance while using someone else’s vehicle.

On a personal auto policy, liability coverage also extends to any trailer being pulled by an insured vehicle. This differs slightly from a commercial auto policy, as liability generally does not extend to trailers unless the trailer is specifically insured for liability coverage.

What is excluded by my liability insurance?

Not everything is covered, and the following are the types of situations where coverage will be excluded:

  • Intentional bodily injury or property damage
  • Damage to property being transported by the insured
  • Property damage to items that are rented, used by, or in the care of the insured
  • Bodily injury to an employee during the course of employment (except domestic employees like maids and nannys)
  • Damages that occur when someone pays you to drive them somewhere
  • If you are employed in the selling, repairing, servicing, storing, or parking of vehicles, coverage is excluded
  • If you steal a car or use it without permission, you will not be covered
  • If you let your neighbor borrow your car and they let a friend use it, chances are coverage will not apply
  • If you use your vehicle for racing or even practicing for racing, liability coverage is excluded

There are a lot of questionable situations that arise in car insurance, especially when dealing with business use of a vehicle or permissive use. If you use your vehicle regularly for business, you will want to purchase a commercial auto policy rather than a personal auto policy. It provides broader coverage for business use exposures.

How much will my company pay for injuries and damage?

The amount of liability coverage you have is outline on your policy Declarations page, which is usually the first page of your policy. It will state your coverage limits in either a split limit form like 100/300/50 or in a combined single limit like 250 CSL.

For a split limit, the first number is the bodily injury (BI) coverage per person. The second number is bodily injury coverage per incident, and the third is the property damage (PD) limit. Those values are in thousands, so 100/300/50 would give you $100,000 in BI coverage per person, $300,000 in BI coverage per incident (or accident), and $50,000 in property damage coverage.

The per incident value is the maximum amount of coverage you have for any single accident. So using the prior limits, if there are four people injured in an accident you cause and their medical bills are $80,000 each, you will have insufficient coverage since your per incident coverage is only $300,000.

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Another example is if you cause a chain reaction accident that injures three drivers and causes $50,000 in property damage to their vehicles, the property damage value also applies to the per incident cap, so you now only have $250,000 in coverage for medical bills.

For a combined single limit, there is one value that can be applied to any combination of BI or PD claims. It gives more flexibility in how claims are paid.

For example, if you cause an accident that results in totalling out a brand new Mercedes-Benz, the 100/300/50 split limit likely will not be enough coverage to pay for the damage to the car because you only have $50,000 in property damage coverage. Multi-car accidents can quickly result in large claims and insufficient liability limits.

If you had the 250 combined single limit coverage, you have $250,000 of coverage that can apply to either injuries or property damage, so it would easily pay to replace the Mercedes.

How much liability insurance am I required to buy?

Unfortunately, many people buy the lowest liability limits available just to be able to license their vehicle. The state minimum mandated limits are very low, and provide very little protection.

The limits required by each state are shown in the table below.

State by State Car Insurance Liability Requirements
State Required Coverages Minimum Liability Limits
AL Bodily Injury and Property Damage Liability 25/50/25
AK Bodily Injury and Property Damage Liability 50/100/25
AZ Bodily Injury and Property Damage Liability 15/30/10
AR Bodily Injury and Property Damage Liability 25/50/25
CA Bodily Injury and Property Damage Liability 15/30/5
CO Bodily Injury and Property Damage Liability 25/50/15
CT Bodily Injury and Property Damage Liability, Uninsured/Underinsured Motorist 20/40/10
DE Bodily Injury and Property Damage Liability, Personal Injury Protection 15/30/10
DC Bodily Injury and Property Damage Liability, Uninsured Motorist 25/50/10
FL Property Damage Liability, Personal Injury Protection 10/20/10
GA Bodily Injury and Property Damage Liability 25/50/25
HI Bodily Injury and Property Damage Liability, Personal Injury Protection 20/40/10
ID Bodily Injury and Property Damage Liability 25/50/15
IL Bodily Injury and Property Damage Liability, Uninsured Motorist 20/40/15
IN Bodily Injury and Property Damage Liability 25/50/10
IA Bodily Injury and Property Damage Liability 20/40/15
KS Bodily Injury and Property Damage Liability, Personal Injury Protection, Uninsured Motorist 25/50/10
KY Bodily Injury and Property Damage Liability, Personal Injury Protection 25/50/10
LA Bodily Injury and Property Damage Liability 15/30/25
ME Bodily Injury and Property Damage Liability, Uninsured/Underinsured Motorist 50/100/25
MD Bodily Injury and Property Damage Liability, Personal Injury Protection, Uninsured Motorist 20/40/15
MA Bodily Injury and Property Damage Liability, Personal Injury Protection, Uninsured Motorist 20/40/5
MI Bodily Injury and Property Damage Liability, Personal Injury Protection 20/40/10
MN Bodily Injury and Property Damage Liability, Personal Injury Protection, Uninsured/Underinsured Motorist 30/60/10
MS Bodily Injury and Property Damage Liability 25/50/25
MO Bodily Injury and Property Damage Liability, Uninsured Motorist 25/50/10
MT Bodily Injury and Property Damage Liability 25/50/10
NE Bodily Injury and Property Damage Liability 25/50/25
NV Bodily Injury and Property Damage Liability 15/30/10
NH Financial Responsibility Only, Uninsured Motorist 25/50/25
NJ Bodily Injury and Property Damage Liability (Standard Limits Shown), Personal Injury Protection, Uninsured Motorist 15/30/5
NM Bodily Injury and Property Damage Liability 25/50/10
NY Bodily Injury and Property Damage Liability, Personal Injury Protection, Uninsured Motorist 25/50/10
NC Bodily Injury and Property Damage Liability 30/60/25
ND Bodily Injury and Property Damage Liability, Personal Injury Protection, Uninsured Motorist 25/50/25
OH Bodily Injury and Property Damage Liability 12.5/25/7.5
OK Bodily Injury and Property Damage Liability 25/50/25
OR Bodily Injury and Property Damage Liability, Personal Injury Protection, Uninsured Motorist 25/50/10
PA Bodily Injury and Property Damage Liability, Personal Injury Protection 15/30/5
RI Bodily Injury and Property Damage Liability, Uninsured Motorist 25/50/25
SC Bodily Injury and Property Damage Liability, Uninsured Motorist 25/50/25
SD Bodily Injury and Property Damage Liability, Uninsured Motorist 25/50/25
TN Bodily Injury and Property Damage Liability 25/50/15
TX Bodily Injury and Property Damage Liability 25/50/25
UT Bodily Injury and Property Damage Liability, Personal Injury Protection 25/65/15
VT Bodily Injury and Property Damage Liability, Uninsured/Underinsured Motorist 25/50/10
VA Bodily Injury and Property Damage Liability, Uninsured Motorist 25/50/20
WA Bodily Injury and Property Damage Liability 25/50/10
WV Bodily Injury and Property Damage Liability, Uninsured Motorist 20/40/10
WI Financial Responsibility Only, Uninsured Motorist 50/100/15
WY Bodily Injury and Property Damage Liability 25/50/20

 

If you take the claim examples we talked about earler and apply the state required limits shown above, it’s easy to see why buying the minimum limits is a bad idea. It doesn’t take a large accident to exhaust the state minimum liability limits for any state.

What additional payments can be made by liability coverage?

On a standard personal auto policy, the insurance company will make the following supplementary payments:

  • Up to $250 for the cost of bail bonds as the result of an accident
  • Interest that accrues on any judgement from a suit defended by your company
  • Up to $200 a day for loss of earnings
  • Other reasonable requests

These payments may be different for your company, and your policy should spell out exactly what is provided under the Part A section. Use our FREE quote tool to compare rates now!

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