What Is It & How Much Do You Need?
There are almost 250 million licensed drivers in the United States, according to the National Highway Traffic Safety Administration. On average, there are roughly 6 million passenger car accidents every year.
Car accidents are a fact of life, but you can prevent a bad situation from becoming much worse by carrying automobile liability insurance.
What is automobile liability insurance?
Auto liability insurance pays for damages suffered by another person caused by an accident in which you were at fault.
Liability insurance consists of two types of auto insurance:
- Bodily injury liability coverage pays the other person’s medical expenses (up to the policy limits). In some cases, the person’s lost wages and legal fees may also be covered.
- Property damage liability coverage pays the other person’s property damage (up to the policy limits).
How does auto liability insurance work?
All 50 states, with the exception of New Hampshire, require drivers to carry auto liability insurance. Each state sets the minimum amount of liability coverage required to drive in the state.
For example, in Washington, anyone who drives a motor vehicle or motorcycle in the state is required to carry liability insurance with the following minimums:
- $25,000 for injuries or death to another person,
- $50,000 for injuries or death to all other people, and
- $10,000 for damage to another person’s property
Let’s take a closer look at what these numbers mean:
Scenario one: You run a red light and hit another driver. The driver suffers $30,000 in injuries and $5,000 in property damage. Your insurance will cover all of the property damage because it falls below your coverage limits per accident ($10,000). Your insurance will only cover $25,000 of the driver’s injuries because your coverage limit per accident is $25,000. You will be personally liable for the remaining $5,000.
Scenario two: You’re texting and driving when you hit another driver. The driver suffers $25,000 in injuries. What’s more, there are two passengers in the vehicle who each suffer $25,000 in injuries. Your policy coverage is limited to $50,000 for injuries to all people involved in a single accident, which means you will be personally liable for the remaining $25,000.
The minimum liability insurance required by states is rarely enough to cover the damages that result from a serious car accident. As a result, drivers are typically on the hook for some amount of damage if they cause a serious accident. Even if you don’t have the cash to satisfy a judgment against you, the injured party may be able to garnish your wages and sell some of your assets. For this reason, many people choose to purchase liability insurance that exceeds the minimum requirements.
Does your auto liability insurance protect you when you’re driving in another state?
You purchased the minimum amount of liability insurance for your state. Summer arrives, and you decide you want to take a road trip to the other side of the country.
Will your liability insurance protect you in every state that you drive through?
Yes. Your auto liability insurance covers you when you’re traveling out of state. What’s more, your insurance policy will typically meet the minimum requirements of the state where your accident occurs.
For example, say you purchase the minimum amount of liability insurance coverage in your state, but you get into an accident in another state where the requirement is $10,000 more. Your insurer will typically cover the difference (this is known as the “broadening clause” in your insurance policy).
Enjuris tip:Your auto liability insurance covers you when you travel out of state. However, if you drive across international borders or move to another state, you should update your car insurance company, or you risk not being covered.
What about the damages you suffer in a car accident?
Liability coverage pays for the damages sustained by other drivers and passengers in a car accident that you cause. To ensure that YOUR damages are covered, you’ll need to purchase optional coverage. Here are some common examples of optional coverage that you may be able to purchase in your state:
- Comprehensive coverage provides coverage for losses other than those caused by a collision (vandalism, falling objects, fire, etc.)
- Collision coverage provides coverage for damage to your vehicle caused by an accident with another vehicle or an object (such as a fence)
- Personal injury protection (PIP) provides up to $10,000 coverage regardless of who’s at fault (what’s covered depends on the specific policy)
- MedPay provides coverage for medical expenses incurred by you and your passengers regardless of who is at fault.
- Uninsured motorist (UM) coverage provides coverage for bodily injury and property damage sustained by you or the passengers in your vehicle as a result of an accident involving an uninsured driver.
- Underinsured motorist (UIM) coverage provides coverage for bodily injury and property damage sustained by you or the passengers in your vehicle as a result of an accident involving a driver who has insufficient insurance to cover the damages.