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Liability insurance helps pay for the costs associated with bodily injuries or property damage that you're found to be legally responsible (or liable) for causing to third-parties. It doesn't cover the costs of your own injuries or the expenses incurred to your own property.
All states require you to have some sort of financial responsibility coverage in order to drive a vehicle within their boundaries. Some states insist you meet this requirement through auto liability insurance. Others give you the option of bypassing liability insurance if you can provide proof you have enough financial resources to handle the minimum standard set by the state. Depending on your state, you may have to post a bond.
Your liability insurance generally applies to vehicles you own, as well as vehicles you drive with the owner's permission.
Of course, you can buy an auto insurance policy that doesn't include liability protection; you can just have it for collision, comprehensive, uninsured motorist protection, or other forms of coverage.
Still, though, for most drivers, liability insurance is the simplest way to meet any financial responsibility requirements imposed by their state.
If you live in a state that doesn't force you to carry auto liability coverage in order to drive, you might be tempted to try to meet the financial responsibility standards by some other manner.
However, doing so might not be the smartest move.
If you're liable for a serious accident, you may face a lawsuit from the injured party. If the injured party wins, your life savings or your property could be in jeopardy. Even if you or your family are wealthy, the blow from a successful lawsuit could force you to make all sorts of changes to your life. Liability coverage can shield you from most or all of this, especially when it's coupled with an umbrella policy.
Additionally, liability insurance pays your legal defense costs should an injured party sue you.
Liability insurance allows you to handle exorbitant claims or lawsuits in stride. Just make sure you carry an adequate amount of protection; see our bodily injury and property damage articles for more information, or talk to your insurance agent or company.
Being liable for an accident means you're either partly or fully responsible for causing it, depending on how your state's insurance commission defines "liability".
If you're found to be liable, there's a chance your insurance premiums will rise, especially if you've caused other accidents within a short period. Of course, your carrier could also decide just to drop you as a customer, leaving you to find coverage with another provider.
However, most insurance companies offer some sort of "accident forgiveness" policy. While the terms of this practice vary by the provider, it can mean that your insurer will not raise your premium if it's your first or second "chargeable" accident within a certain number of months or years. Or, it may mean your insurer may drop an accident off your record after a specified amount of time has passed (usually resulting in reduced premiums). Usually, the longer you've been a claim-free customer, the more generous your insurer will be.
Once you've been in an accident, notify your insurance carrier or agent immediately. Be sure to provide all the information that's requested, and make copies of everything you send to your company. The exact steps to follow depend on your carrier, but you may be asked to fill out and submit forms, or send a copy of the police report.
While it may be tempting to do so, don't hide or downplay the truth to your insurer. Remember, your insurance company will represent you if the other party files a claim or sues you. And, the only way your provider can fully do its job is if you're cooperative with the information, and tell the full story.
As with many things related to insurance, the term "no-fault" insurance differs depending on where you live.
However, generally this refers to a practice where your insurer will pay you for the losses you incur in an accident, no matter if you were liable for them or not. And, the other party's provider will pay for their costs. In this situations, the insurance companies involved huddle to determine who was at fault, and make their own financial arrangements. No matter what, your insurance company will pay for the damages to yourself and your property.
States that allow no-fault insurance limit the ability to sue over an accident. Again, the restrictions vary by state. However, these limits usually don't apply to property damage, so if you live in a no-fault state, you may want to carry a greater amount of this type of coverage because you can be readily sued. As always with insurance matters, discuss the situation with your agent or provider.
Auto liability insurance is broken into two main categories: bodily injury and property damage. Each type of coverage comes with a limit on how much of the cost your insurance company will pay. You set this limit by deciding how much you're willing to pay for the coverage. The more you're willing to pay, the bigger the risk your insurer is willing to assume.
Bodily Injury Liability
As the name implies, this covers costs associated with personal injuries. Remember, liability insurance only pertains to the injuries of other people, not your own.
Bodily injury (sometimes referred to as "BI") protection covers all sorts of matters, such as:
- Hospital bills
- Doctor visits
- Rehabilitation expenses
- Long-term nursing care bills
- Lost earnings due to an accident
The exact coverage varies by the insurer; please see our bodily injury liability article for more information.
Property Damage Liability
Occasionally called "PD" insurance, this deals with damages you cause to third-party properties, such as:
- Street lights
- Street signs
- Utility poles
- Mail boxes
- Garage doors
As with bodily injury insurance, the protection given depends on your insurance company; please see our property damage article to learn more.
Property Protection Coverage
While bodily injury and property damage insurance are the two primary types of auto liability insurance, other types of coverages exist, especially for those living in no-fault states.
For instance, Michigan residents must obtain property protection coverage. Also known as limited property damage insurance, this coverage helps pay for damages you incur to fixed or stationary structures, such as parked vehicles, utility poles, or buildings.
In This Section
- Liability Insurance Requirements
Find out about bodily injury and property damage liability coverage, including what they cover and how your policy's limits determine how much you'll receive in the event of a claim.
- Bodily Injury Liability Coverage
Online Guide To Bodily Injury Liability Coverage. Get Online Info Cover Auto Insurance, Liability Insurance, Bodily Injury Coverage And Personal Injury.
- Property Damage Liability Coverage
Get Info On Property Damage Liability Coverage And Auto Insurance. We Cover Liability Insurance And Car Insurance Info If You Are Involved In An Auto Accident.
- When To Buy Liability Insurance
Find out how liability coverage can help protect your finances after an at-fault car accident.
- Non Owner Liability Insurance
Guide To Non Owner Liability Insurance. Learn More On Nonowned Vehicle Liability Coverage, Hired Auto Insurance, Commercial Auto Insurance And Related Types Of Car Insurance Policies.
- Liability Limits
Info On Liability Limits And Auto Insurance Coverage. Limits Of Liability Insurance Vary By State. Learn How To Determine Liability Coverage Limits And Why States Have Car Insurance Minimums.
- Liability Investigation
Get Liability Investigation Info And Tips On Taking Care Of Auto Accident Damage With Car Insurance. Each Auto Insurance Company Will Investigate To Determine Who Is At Fault.
- How To Buy Liability Insurance
Liability coverage is required in many states. Find out how much you'll need and how to shop for an affordable policy that includes it.
- How To Get A Competitive Liability Insurance Quote
Tips On Getting A Competitive Liability Insurance Quote. Shop Multiple Car Insurance Companies. Compare Liability Coverage And Auto Insurance Rates Online. Learn How To Save Money.
- What To Look For In A Liability Policy
Get Liability Policy Info To Ensure You Get Adequate Car Insurance Coverage. Liability Insurance Policies And Limits Vary. Be Certain You Get Liability Coverage That Suits Your Needs.
- Tips On Working With A Liability Adjuster
How To Work With A Liability Adjuster If You Are Handling Car Accident Damages With An Auto Insurance Company. Get Info On Accident Claims, Liability Insurance And Car Insurance Coverage.
- How To Prepare For A Liability Investigation
Steps On Getting Prepared For An Auto Insurance Liability Investigation Following An Auto Accident. Learn More On Handling Car Insurance Claims And Car Accidents With An Insurance Company.
Other Topics in This Section
- Full Coverage Auto Insurance
Full Coverage Auto Insurance Info. Get Info On Physical Damage, Collision And Comprehensive Insurance As You Find Out How Auto Insurance Companies Define Full Coverage Insurance.
- Rental Reimbursement Coverage
Learn What Rental Reimbursement Coverage Pays For. This Type Of Auto Insurance Is Convenient If You Need A Car Rental While Your Car Undergoes Auto Repair After An Auto Accident.
- Loan Lease Payoff Coverage
Find Out When Loan Lease Payoff Coverage Is Required. Learn More On Actual Cash Value And Adequate Auto Insurance If You Have An Unpaid Auto Loan. Some Lenders Require More Car Insurance.
- SR 22
Flip through our SR-22 pages to learn more about this form, including who needs one and how to have one filed on your behalf.
- Emergency Road Service Coverage
Info On Emergency Road Service Coverage Offered Via An Auto Insurance Company. Learn More On Car Insurance Policies With Roadside Assistance For A Car Breakdown.
- Towing And Labor Coverage
Info On Towing And Labor Coverage And Auto Insurance. Learn The Benefits Of Having Towing Insurance For A Car Breakdown Or Auto Accident. Determine If You Need This Type Of Car Insurance.
- Mechanical Breakdown Insurance
Guide To Mechanical Breakdown Insurance For New Cars. Learn More On The Types Of Car Insurance Customers That Best Benefit From This Type Of Auto Insurance. Avoid Pricey Auto Repair.
- Umbrella Insurance
Umbrella Insurance Defined. Learn More On Umbrella Policies, Additional Liability Insurance And Covering Losses That Might Not Be Included By Your Auto Insurance Policy.
- Uninsured Motorist Coverage
Online Guide To Uninsured Motorist Coverage And Auto Insurance. Find Out More On Car Insurance Policies That Protect You In Car Accidents With Uninsured Drivers.
- Underinsured Motorist Coverage
Guide To Underinsured Motorist Coverage And Auto Insurance. Look Online For Info On Car Insurance Policies That Cover Expenses From Car Accidents With Underinsured Drivers.
- Personal Injury Protection
Get a better understanding of PIP coverage, including what it can help cover and why it's required in no-fault states.
- Gap Insurance
If you lease or have a loan on your car, find out how gap coverage can help protect your finances in the event your car is totaled.
- Liability Insurance
Accidents happen. Read up on how liability coverage can help protect your finances in the event you're found legally liable for accident damage.
- Physical Damage Insurance
Online Guide To Physical Damage Insurance And Auto Insurance. Get Info On Car Insurance Coverage And Property Damage In Case You Get In A Car Accident.
- Rental Car Insurance
Online Guide To Rental Car Insurance And Auto Insurance. Learn More On Insurance Coverage Before You Rent A Car. Not All Insurance Policies Cover Auto Rentals.
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