What does liability insurance cover?
In most states liability insurance coverage is required by the law. So basically what does liability insurance cover? When you get into an accident where you cause injuries and loss to the other party you would be held responsible for these losses. The cost of these injuries and damages might be small at times but on other times it could be very high. It could be high to the extent that you might need to sell off any of your assets to cover the losses you caused to the other party. Liability insurance hence covers you against these losses and makes your insurance carrier responsible to pay for these damages on your behalf. The risk associated with accidents make liability insurance coverage very important. This is the reason why this kind of insurance is required essentially by most of the states. There is a minimum level of liability insurance that every vehicle owner must have. For instance in Texas, the state requires a minimum of $30,000 for bodily injury liability, $60,000 for the accident as a whole and $25,000 for property damage liability. But usually this level of liability insurance is not sufficient to protect you against damages so you must get insurance greater than this amount. The law enforcement authorities determine who was at fault during the accident. Based on that information it would be determined who is entitled to liability insurance coverage. In some cases a percentage is set for both the parties. Liability insurance however does not cover the damages that you incur as a result of accident in which you are at fault. Personal injury protection coverage provides protection against such damages.
Following are the components of liability insurance coverage: –
Bodily injury coverage: –
If you caused an accident in which the other party sustained injuries bodily injury coverage pays for the medical bills arising from the injuries. Expenses such as medicines, nursing service, physiotherapy and all other related to the accident shall be paid by the insurance carrier. The insurance company however sets a limit to the maximum amount that it will pay as coverage.
Property damage coverage: –
If the vehicle of the other party is also damaged, the property damage coverage pays for the repair or replacement of the vehicle.
When arriving at the rate of liability insurance coverage, the insurance company uses a number of factors to assess the rate. Your driving history is a key determinant of your premium rate. Those with clean driving record are likely to be charged a lower rate. Age of the applicant also matters when arriving at premium rate. Young and elderly drivers are considered as risky hence charged a higher premium. Likewise, women are riskier drivers compared to men so charged a higher premium. Marital status also impacts the premium rate. Generally married people are more careful and prudent while driving unlike the unmarried people who tend to get reckless while driving. So risk associated with insuring unmarried people is high leading to high premiums.
So this is all about what liability insurance cover does.