What is Liability Coverage

There are two types of liability coverage in car insurance – bodily injury liability coverage and property damage liability coverage. These coverages are part of the auto insurance policy and cover people in an accident that is the insured’s fault.

Bodily injury liability coverage protects the insured from bills incurred in an accident if the accident was his fault. Coverages include emergency aid (at the scene), bodily injury medical expenses, loss of income compensation, funeral expenses, legal defense fees, bail bonds (the person must be listed on the insured’s policy) and medical services for sickness and/or disease.

If another party files a lawsuit against the insured, the insurance company will provide legal defense for the insured. Punitive damages (pain and suffering, loss of income, etc) are also included in this coverage (should the other party win a settlement or judgment). Bodily injury liability coverage does not cover the insured or others on the insured’s policy.

Choose the highest limits you can afford. The first number denotes how much the insurance policy will cover for each individual person injured. The second number denotes how much the policy will cover in total. For example, if you have 10/100 coverage, the policy will cover up to $10,000 for each person, but it caps at $100,000 for the incident. Therefore, if 11 people were injured and each person won a settlement or judgment for $10,000, insurance would pay the first $100,000 but the insured would be responsible for remaining $10,000 for the 11th person injured.

In the same scenario, if only one person was injured because of the actions of the insured, and the injured person won a settlement or judgment for $20,000, the insurance would only cover $10,000. The insured would be responsible for the balance ($10,000).

Property damage liability coverage covers the insured (if the accident is the insured’s fault) for structural damages to buildings, vehicle repair or replacement costs and stationary structure repair or replacement. It normally applies to the accident victim’s vehicle, but could include other stationary things such as a house or business, fences and utility poles. This coverage will also help the insured from losing his assets because of a lawsuit. In the state of Michigan, limited property damage is also available. This limited policy provides protection if the insured causes damages to another vehicle.

Related topics: Other Types of Liability Insurance, More Auto Insurance Info