Automobile liability insurance provides coverage to the purchaser for any liabilities they may occur during the course of an accident when they are at fault. In most states it is mandatory for a drive to carry, at a minimum, some form of automobile liability insurance.
What are the usual terms of automobile liability insurance?
In the United States the coverage normally works for claims against the policy holder, and often any other driver of the insured vehicle – as long as they don’t share the same address as the policy holder, and aren’t specifically excluded in the terms and conditions of the policy.
If somebody does live at the same address as the policy holder, they must be specifically added to the policy. So if you have children who reach an age where they can drive, you need to add them to this coverage.
The insurance may or may not cover you to drive other people’s vehicles, so it’s worth checking to see whether you covered. A policy which does cover you to drive other vehicles is called a “non-owner’s policy”. A “non-owner’s policy” is often used by drivers who have had their licenses suspended and need some insurance for its reinstatement.
What is covered under liability coverage?
There are two main areas of coverage for automobile liability insurance:
Bodily Injury (BI) – This covers damage to another person(s) and any financial compensation that may be required, such as medical bills or financial losses.
Property Damage (PD) – This covers damage to any physical property that may result from an accident, it also may cover additional expenses incurred owing to that damage. So for example; if you knock down a telephone pole, your coverage may not just pay for repair to the pole, it may also be used to cover losses to the telephone company.
How much is covered under automobile liability insurance?
Your insurance policy will cover details of the dollar amounts but you may have one of these two coverage options:
Combined Single Limit
This kind of policy specifies a dollar amount for the maximum coverage to both PD and BI, under the policy. So if you crash into someone’s car – the total payments for the car repairs, and any injuries to the occupants cannot exceed this limit.
This policy creates a clear difference between Bodily Injury and Property Damage and has a maximum payout value for each.
(To read more about auto liability insurance outside of our glossary, please read our more detailed article on the subject.)