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Car owners are responsible for having auto insurance on any vehicle they own and operate on the roadway. This legal requirement is in place to protect both the driver of the automobile and the people and property that vehicle may come in contact with when on the road. The amount and type of car insurance is determined by state minimum requirements. For individuals who finance a vehicle, the lender may have additional minimum requirements until the vehicle is paid in full. Here we look at car insurance basics, with a focus on liability automobile insurance.
What types of coverage are available?
Automobile insurance is generally made up of six basic components. They include bodily injury liability, property damage liability, personal injury protection, collision, comprehensive, uninsured/underinsured motorists coverage and extra coverage such as roadside assistance. For the most part, minimum state requirements include liability coverage.
What is liability insurance?
Liability insurance provides coverage for individuals or property who may be injured or damaged as a result of an accident involving or caused by your vehicle. Your liability insurance will also protect you from legal bills that may result from an accident.
Bodily injury liability coverage.
This type of liability insurance will protect you and others if someone is injured in an accident that is your fault. This type of protection can provide coverage that includes:
- bills resulting from emergency aid
- bills resulting from personal injury compensation claims
- bills resulting from sickness or disease
- loss of income compensation
- funeral expenses
- fees and expenses associated with legal defense for yourself and anyone listed on your policy
Property damage liability coverage.
As the name suggests, this type of coverage provides protection in the event another person’s property is damaged as a result of an accident. Here are a few of the expenses covered by property damage liability insurance:
- replacement or repair of another person’s vehicle
- replacement or repair of stationary objects damaged by your vehicle
- damage to homes or other personal property
In addition to paying for the above items, property damage liability insurance will also protect your assets if you find yourself facing a lawsuit as a result of the accident.
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How much liability insurance is enough?
It is important to understand that minimum requirements set forth by the state in which you reside may not be sufficient protection in the event of an accident. While maintaining the minimum amount of liability insurance will keep you on the right side of the law, it may not help you if the damage caused by the accident surpasses your maximum coverage. For this reason it is recommended that you carry as much liability insurance as you can comfortably afford. This will reduce the chances of being sued for the difference should the damages go beyond your coverage. Some insurance experts recommend carrying at least $100,000 in bodily injury insurance and a minimum of $50,000 in personal property liability insurance. When it comes to insurance, there are situations where it certainly pays to be over-insured versus under-insured.
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