Liability Coverage: Protection When You Are Culpable
Automobile liability coverage,bodily injury liability coverage, commercial auto liability
If you, or someone operating your car with your knowledge and permission,
is at fault in an accident, liability coverage will insure you against
the death or injury of parties involved, and against damage to property.
Suppose that you are involved in an accident, where the blame lies with
you – you may, for example, drive through a red light, hit someone else,
perhaps injuring yourself, the driver and passengers and damaging both
vehicles. In such a case, if you have liability coverage, your insurance
provider has to protect you, even to the extent of a defence in court
if need be. Your provider also has to deal with the damages incurred in
respect of the other car or cars involved in the accident, of the expenses
incurred in treating any of the parties involved in the accident – there
could be high medical and hospitalization expenses, and even claims for
mental trauma. Please note that liability coverage will not take care
of your medical costs or your vehicle’s repair costs, but these areas
will be dealt with by other aspects of your insurance policy.
Your liability coverage will protect you even if an accident occurs where
no one seen has seen what happened, or where the fault cannot be assigned
to a particular person. If you have to go into court, your insurance provider
will take care of your defence.
However, there are some restrictions on the liability amounts covered
by your insurance provider. If you go beyond the limits set by your policy
and the area of coverage, you will be liable for those amounts.
In most states in the U.S., liability
coverage is compulsory; people in the remaining states are
bound by financial-responsibility regulations. The compulsory statutory
amounts are fairly low – for hurt to a single person’s body the amount
set is between$20,000 and $30,000. For hurt to many people involved in
a mishap, a figure of $50,000 has been set; while damage to property arising
from the accident carries a compulsory amount of $25,000.
The two states which have the most stringent laws are Maine and Alaska
– here, $25,000 coverage is mandatory for property damage, $50,000 coverage
is required for bodily injury to a single person involved in an accident,
and $100,000 coverage is needed for all the people injured.
What Coverage Do You Currently Have?
Are you familiar with the terminology used in the insurance
industry? If, as is likely, you are not, you may not be clear
about exactly what your auto insurance policy covers.
You could hear an insurance policy referred to as 50 / 100 / 25 – would
you know what this means? The 50 tells you how many thousands of dollars
worth of coverage is provided for one person’s bodily injuries, the 100
refers to the coverage for the injuries of all the people involved in
the mishap, and the third number, 25, is an indication of the property
damage coverage
.
The providers who offer single limit policies give you a single liability
limit for a particular accident, without breaking up the amount up into
coverage for injuries to people or the destruction of property. Single
limit policies are the law in Canada.
Costs that your provider may incur to protect you in a legal action, and
payments covered in the policy such as money for bail bonds, and money
to recompense for loss of earnings when you have to be present at court
at your provider’s request, are not considered in the limit of liability.
Often, a clause in a policy releases the insurance provider from defending
you at a cost beyond the amount that has been agreed upon.
How Much Coverage Should You Carry?
It’s a good idea to maximise auto
liability coverage – damages can cost large sums of money
– settlements of millions of dollars are often made nowadays.
The statutory minimum coverage required for your vehicle will not be enough
to cover large amounts of damages in case you are liable in an accident.
As far as property damage is concerned, keep coverage of $50,000, or at
least $300,000 on a single-limit policy. For bodily injuries, you should
have coverage of a minimum of $100,000 per person for each person involved,
and $300,000 for each accident.
You will find that increasing your coverage is affordable, when you consider
that generally speaking, you would pay about 20% more for coverage of
$300,000 than coverage of $100,000. And the greater the coverage you have,
the less you will have to pay for each thousand dollars’ worth of coverage.
Your insurance agent will give you more detailed information about greater
coverage, including the advantages of umbrella policies.
