What Is Liability Auto Insurance?by Neil Kokemuller
Liability auto insurance is the component of car insurance that pays financial benefits to a third party when you are at fault in an accident. It's a standard part of most policies. In fact, New Hampshire is the only U.S. state or territory that doesn't require that drivers carry at least liability protection, according to the Insurance Information Institute.
Liability Insurance Purpose
The purpose of liability coverage is to ensure that drivers have a way to meet their financial obligations to pay for injury or damage to a third party. If you cause an accident, the other driver may experience a hospital stay and could suffer hundreds or thousands of dollars in damages to a vehicle. Since the typical motorist can't afford to cover these obligations out-of-pocket, requiring liability insurance is a safety net to protect the interests of all drivers.
The two major elements of an auto liability policy are bodily injury and damage protection. Damage protection pays for the repair or replacement costs on one or more vehicles that were affected by the accident. Bodily injury covers pays for the medical expenses of those injured. Policies normally have a maximum payout for damages, as well as maximum per-person and per-accident payouts on injuries. If seven people are injured in an accident you cause, a basic policy might only cover $10,000 per person with a maximum of $50,000 on the accident.
Each state has different minimum coverage levels on liability. In Florida, for example, the minimum levels are $10,000 for personal injury protection and $10,000 for property damage protection. Other states require much higher benefit levels. Even if your state doesn't, such low benefits leave you with a lot of financial risk if you cause an accident resulting in multiple injuries or major property damage.
Uninsured and underinsured motorist insurance often is packaged with an auto liability policy. These elements cover your injury and vehicle costs when the other party doesn't have adequate insurance to pay your costs in an accident.
Your own injuries and vehicle damages aren't covered by an auto liability policy. To cover your expenses, you need collision insurance for accidents, and comprehensive for other damage-causing events.