Your life can change in an instant if you are involved in a car accident. Even if the accident was obviously 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 properly 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 the ancient Chinese culture. When new colonies were being settled, the Chinese usually sent cargo ships filled with supplies across the Atlantic Ocean. These cargo ships were often owned by a group of investors. Occasionally, the cargo ship owners would lose a ship due to storm or piracy. In order to protect their cargo and ships, 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/or 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.
The first auto insurance policy that offered liability coverage was written by an English company 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 about one hundred years prior to 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 required insurance coverage mandated by the state they live in. It is important 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 very large ticket, having your vehicle impounded, or being sued.
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 times 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 accident.
– Emergency aid at the scene of the accident.
– Loss of income compensation.
– Funeral expenses (God forbid).
– 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/or replacement costs for cars involved in the accident.
– Vehicle repair and/or replacement costs for properly parked cars (oops!).
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 policy.
- 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 times 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 serious accident, you could be ruled financially responsible for way more than your auto insurance coverage 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 to not 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 serious accident.
To know how much liability coverage you actually 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 properly 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. Like I said before, proper liability coverage is highly recommended. Go buy it today. You’ll be glad you did!