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understanding liability insurance

Understanding the Liability Insurance Limits on Your Auto Policy

    4 minute read

    Many drivers often look to save on their monthly premiums by only purchasing their state minimum Liability Insurance. But have you seen your state’s required Liability coverage recently? It’s probably a lot less than you think and may not provide sufficient coverage. Without taking the time to understand what your Auto Insurance policy’s Liability limits cover, you could end up owing thousands of dollars in the long run if you get into an accident. Don’t make the mistake of being an underinsured driver. Learn why the minimum Liability Insurance often leaves you with out-of-pocket expenses and how increasing your limits can better protect you.

    What Is Covered by Liability Insurance?

    Liability Insurance covers the cost of another person’s medical expenses and property damage when you are responsible for causing the accident. In other words, Liability Insurance does nothing to reimburse you for your injuries or vehicle repairs. The good news is that this coverage protects you from having to pay out-of-pocket up to your policy’s limits. However, the bad news is that oftentimes those limits fall short, resulting in unexpected and costly expenses. Liability Insurance has two types of coverage, which typically include:

    1. Bodily Injury Liability

    liability insurance covers legal defense
    • Hospital fees and emergency care
    • Legal defense and court fees
    • Loss of income due to rehabilitation
    • Funeral costs

    2. Property Damage Liability

    • Vehicle repairs
    • Bills associated with the damaged property (wall, pole, tree, etc.)

    Understanding Your Liability Insurance Limits

    Every state has different requirements regarding Auto Insurance, including the amount of coverage you are legally required to carry as a driver. Besides Florida, all states require their drivers to have bodily injury coverage. In addition, all 50 states require their drivers to have property damage coverage. When looking at your Auto policy, you may see three sets of numbers for your Liability coverage. For example, it may appear as $15,000/$30,000/$10,000 or 15/30/10. These three numbers are your limits of liability that represent the following:

    $15,000 of coverage for bodily injury
    (per person)
    The first number is the maximum amount your insurance company may pay to a single person’s injuries involved in the accident. The person does not have to be the driver and can be a passenger, bystander, or pedestrian.
    $30,000 of coverage for bodily injury
    (per accident)
    If multiple people are injured in an accident that you caused, this is the maximum amount your insurance company may pay for their medical expenses in total. It’s important to note that an injured person is still capped at the $15,000 per person limit from the example above.
    $10,000 of coverage for property damage
    (per accident)
    The final number represents the maximum amount your insurance company may pay for property damages you caused. Additionally, this amount is for the entire accident and not allocated for each property you hit.

    Scenarios to Help You Understand Liability Limits

    Let’s take a look at three scenarios on how a 15/30/10 bodily injury and property damage coverage would work.

    Situation #1: Hitting a bicyclist and damaging their bike

    injured bicyclist

    Bicyclist’s injuries: $18,000 | Bike: $4,000

    Even though your policy covers up to $30,000 for bodily injury per accident, your coverage per person is $15,000. The remaining $3,000 to cover the bicyclist’s injuries would be out of your pocket. Your property damage is enough and covers the entire $4,000 to repair or replace their bike.

    Situation #2: Sideswiping a vehicle with multiple passengers

    Person A’s injuries: $20,000 | Person B’s injuries: $15,000 | Car: $17,000

    You would be responsible for the remaining $5,000 for Person A’s injuries. Since your bodily injury limit per accident is $30,000, your remaining $15,000 of bodily injury coverage would cover all of Person B’s injuries. However, your property damage coverage is not enough, and you’ll be responsible for $7,000 to repair their vehicle.

    Situation #3: Rear-ending a mini-van and hitting a light pole

    bodily injury - liability insurance

    Person A’s injuries: $16,000 | Person B’s injuries: $12,000 | Person C’s injuries: $4,000

    Car: $8,000 | City’s light pole: $4,000

    In this scenario, everybody is within your policy’s per person limit. Unfortunately, when you add all the medical expenses together, the $32,000 is above your combined accident limit. Once the $30,000 is exhausted, you’re responsible for $2,000 in bodily injury expenses. It’s worth noting that property damage coverage covers repair costs from an entire accident and its limits are not separated by each property. Since your property damage only covers $10,000 per accident, you’re responsible for the remaining $2,000 out-of-pocket.

    Why Have Higher Liability Limits?

    When you consider the scenarios above, it’s clear to see that less is never more when it comes to Liability Insurance. Any costs that exceed your Liability coverage limits is your responsibility. That’s why it’s always a good idea to consider adding more coverage to your Car Insurance policy than your state’s mandated minimum. Just imagine how quickly medical bills and car repairs add up in a multiple car accident. Sure, you might save yourself a few dollars on your monthly premium, but is being an underinsured driver worth it in the event of an accident?

    What Limits Should I Have For my Auto Liability Insurance?

    Understanding your insurance policy could help you avoid costly surprises and frustration after an accident. We know that Auto Insurance policies are sometimes confusing and an absolute nightmare to read. Speak with an AIS Insurance Specialist today at (855) 919-4247 to review your liability limits. We can also help you choose the appropriate liability coverage limit that works for you.

    The information in this article is obtained from various sources and offered for educational purposes only. Furthermore, it should not replace the advice of a qualified professional. The definitions, terms, and coverage in a given policy may be different than those suggested here. No warranty or appropriateness for a specific purpose is expressed or implied.