Auto Liability Insurance

What is auto liability insurance? Auto Liability Insurance coverage pays for the damage you are ruled legally responsible for in an auto accident. This can include property damage and personal injury to others. In the United States, it is required for you to have liability insurance in most states if you drive a car.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Insurance Feature Writer Rachel Bodine

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years Leslie Kasperowicz

UPDATED: Jun 6, 2022

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Your life can change in an instant if you are involved in a car accident. Even if the accident was not your fault, a court might not agree. And that means that you will have to pay out of your pocket for all the damages and injuries. If you do not want to get caught up in a nasty settlement that you cannot afford, you need to have liability insurance.

Auto Liability Insurance coverage pays for the damage you are ruled legally responsible for in an auto accident. This can include property damage and personal injury to others. It is highly recommended that all drivers make sure they are adequately insured with liability coverage before they get behind the wheel. Fortunately, in the United States, you don’t have a choice. If you drive a car, most states require you to have liability insurance by law.

The History of Liability Insurance

The concept of auto insurance can be traced back to ancient Chinese culture. When new colonies were being settled, the Chinese usually sent cargo ships filled with supplies across the Atlantic Ocean. A group of investors often owned these cargo ships. Occasionally, the cargo ship owners would lose a vessel due to storm or piracy. To protect their cargo and vessels, these investors took out insurance policies. These policies are now known as marine insurance.

Auto insurance is a modern spin-off of marine insurance. It was developed after policymakers decided that operating a motor vehicle on public property was a privilege and could cause potential bodily injury and damage to property. It was then made mandatory that all motorists must purchase auto insurance to protect innocent third parties against any accident that might occur.

An English company wrote the first auto insurance policy that offered liability coverage in 1895. The first liability car insurance policy written in the United States was written for Dr. Truman J. Martin in 1898. The first mandatory auto insurance law went into effect in Massachusetts in 1927. However, auto insurance policies actually came into play much earlier than that. In fact, car insurance policies can be traced back to about one hundred years before the introduction of the motor vehicle in the United States in 1908.

Today, almost every state in the United States has adopted a mandatory liability insurance requirement. Although car insurance obligations vary widely from state to state, all require minimum liability coverage to protect innocent victims from harm. Unfortunately, not all people who own vehicles carry the needed insurance coverage mandated by the state they live in. It is essential to be familiar with the liability requirements of your state because if you are not carrying the appropriate coverage and are involved in an accident, you could end up receiving a substantial ticket, having your vehicle impounded, or being sued.

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Different Types of Liability Coverage

There are two types of liability coverage that you should be aware of:

  • Body Injury Liability – This type of liability coverage covers medical expenses, pain and suffering, lost wages, and other special damages that you were legally responsible for. Legal costs are also covered by bodily injury liability coverage. Make sure you are adequately covered here. Legal and medical bills are often the most costly part of an auto accident.
    Here is a list of some of the things that are covered by body injury liability:
    – Medical expenses for injuries sustained in an accident.
    – Post-accident medical expenses for sickness or diseases resulting from the crash.
    – Emergency aid at the scene of the accident.
    Loss of income compensation.
    – Funeral expenses.
    – Legal defense fees, bail bonds, and any other type of legal fees.
  • Property Damage Liability – This type of liability coverage covers damaged vehicles, property, and may include loss of use. This can cover damaged homes, mailboxes, and even storefront windows (if you happen to be so unlucky). This also covers legal bills.
    Here is a list of some of the things that are covered by property damage liability:
    – Structural damages to homes, buildings, storefronts, government property, etc.
    – Repair or replacement costs for other stationary objects like fences.
    – Vehicle repair and replacement costs for cars involved in the accident.
    – Vehicle repair and replacement costs for properly parked vehicles.

Auto liability insurance policies have limits. These limits represent the total amount of money that the policy will pay out to you in the event of an accident. There are two types of limit policies you can get when purchasing liability insurance:

  • Combined Single Limit – This type of policy covers both bodily injury and property damage in one plan.
  • Split Limit – This type of policy has separate amounts of coverage for bodily injury and property damage.

Usually, the higher the limits on your liability policy, the higher your premiums will be. Work with your insurance agent to determine how much coverage you need and how much coverage you can afford.

How Much Liability Coverage Do I Need?

One way a lot of consumers lower their insurance premiums is to start stripping away “un-needed” coverage. They often raise their deductibles on their collision coverage and “cheap out” on their liability coverage. Before you even think about doing this, consider one thing: in a severe accident, you could be ruled financially responsible for way more than your auto liability limits. This could cost you millions of dollars in the wrong situation – costing you all the money in your bank account, your cars, and even your home! Make sure not to get left on the hook without proper liability coverage. Although this could cause your insurance rates to go up, consider it to be money well spent if you are involved in a severe accident.

To know how much liability coverage you need, you have to look at how much assets you have that you want to protect. For example, if you make $30,000 per year and rent your apartment, $50,000/$100,000 of coverage should be enough (meaning each person injured could be compensated $50,000, but only $100,000 per accident). If you make $90,000 per year, however, and own a house worth $250,000 and have some money in your bank account, you should consider at least $100,000/$300,000 of coverage.

How to Get Cheap Liability Insurance

After learning more about liability coverage, ask yourself if you are adequately insured. If not, consider calling up your insurance agent to renegotiate your rates and add coverage to your policy. If you do not currently have auto insurance, consider using the quote box at the top of this page to get you connected with an insurance agent who can compare rates for you.

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