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What Does Liability Insurance Cover (All You Need To Know)

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Let me explain to you what liability insurance covers and what it does not!

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What Does Liability Insurance Cover

Liability insurance is a type of insurance coverage protecting you against damages or injuries caused to another person due to your fault.

In most cases, your liability insurance coverage is composed of two parts:

  • Property damage coverage
  • Bodily injury coverage 

Let’s look at each of these coverages in more detail to better understand liability insurance.

Property Damage Coverage

Should there be an accident that was your fault resulting in property damage to another person, your liability insurance coverage can be triggered to possibly cover the damages.

For example, if you get into a car accident at you were at fault, your liability insurance can cover things like:

  • The damages caused to the other driver’s vehicle
  • The damages you caused to someone’s property like fence or pole 

Bodily Injury Coverage

Your liability insurance will also provide you financial protection in case you cause bodily injuries to another.

For example, imagine that you are a homeowner and someone falls on your property getting injured.

Your liability will protect you for things like:

  • The injured person’s medical bills and prescription drips
  • The injured person’s lost wages and salaries
  • Pain and suffering or general damages awarded by the court 

Coverage Limits

When taking liability insurance, you will get financial protection up to the stated liability coverage stated in your insurance policy.

In other words, your insurance company will pay for damages you cause to another person for a maximum of your coverage limit.

You should consult your insurance broker or speak to your insurance provider to see what’s the proper coverage limit you need under your policy as there are different types of limits, such as:

  • Property damage limit
  • Bodily injury limit per person
  • Bodily injury limit per accident

Be sure to properly negotiate your coverage limits so you get the right level of coverage and the right price.

What Does Liability Insurance Not Cover

The primary objective of carrying liability insurance is to get financial protection should you be legally found liable for the damages suffered by another person.

In other words, your liability coverage covers property damages to another person or bodily injuries suffered by another person.

Consequently, your own property damage and bodily injuries will not be covered under your liability insurance.

Typically, your liability insurance will not cover you for:

  • Damages to your property
  • Your medical bills and payments
  • Your own personal injuries 

If you want an insurance policy covering you for your personal property damage, consider getting collision insurance under your car insurance or homeowners insurance.

You can also extend the types of covered claims by purchasing comprehensive coverage.

For your own medical bills, consider getting medical payments coverage or personal injury protection so your own medical bills can also be covered.

What Does Liability Car Insurance Cover

Liability car insurance is a type of insurance that will help cover another car driver’s personal property damage or bodily injuries caused by a car accident that was your fault.

With car liability insurance, you are protected in two ways:

  • Bodily injury liability protection
  • Property damage liability protection

The bodily injury liability protection covers medical expenses and bills that another driver was forced to pay to get treated following an accident that you caused.

It’s also possible that your coverage extends to lost wages suffered by the other driver along with your legal fees if you are sued in court.

Property damage liability protection provides you coverage to repair or replace the other driver’s personal property such as the vehicle, a homeowner’s fence, street poles, or other damaged property.

Legal Requirement

In most states, you are required by law to carry auto liability coverage to legally drive your automobile.

You’ll need to verify your legal requirements to ensure that you take the right coverage and the right coverage limits.

The law will generally require that you have minimum coverage and so most drivers will purchase the minimum needed.

However, it may be worth considering the purchase of a higher limit as car accidents can get quite expensive.

For example, if you have a limit of $100,000 and you cause an accident where the damages go up to $200,000, you will end up having to pay $100,000 out of your pocket as you only have $100,000 coverage.

Auto Liability Coverage Limit

How much car liability coverage is right for you can vary per person.

You first need to respect the minimum auto liability coverage limit imposed by law and ensure that you purchase at a minimum what the law needs you to take.

However, the minimum legal requirement may not be enough to protect you from having to pay significant sums of money should you get into an accident where you are at fault.

You’ll need to consider how much could you potentially be liable for if you get into a car accident and is that an amount that you could afford to pay.

It’s best to speak with an insurance professional to see what’s the right coverage for you but for some people, paying a bit more in premiums in exchange for the peace of mind is well worth the investment.

Umbrella Liability Policy

Under your car liability insurance, you are covered for an amount up to the maximum limit stated in your policy.

In some situations, you may want to consider increasing your policy limit or getting additional protection.

An additional type of liability coverage you may get to protect your personal assets and savings is a personal liability umbrella policy.

The personal umbrella policy will cover you over and above your car insurance liability coverage in case you get implicated in a lawsuit.

Exclusions

What’s important to understand is that your automobile liability insurance provides you with coverage to pay for the damages or injures suffered by a third party.

This means that damages to your property and body are not covered by your auto liability insurance.

If you need to protect yourself against damages and injures, you should consider getting:

  • Collision coverage
  • Comprehensive coverage
  • Medical payments coverage
  • Personal injury protection coverage 

Frequently Asked Questions

Let’s look at some frequently asked questions related to what does liability insurance cover.

What Does Liability Insurance Mean

Liability is a type of insurance providing you financial protection against instances when you may be held liable for having caused damages to another person’s personal property or caused them bodily harm.

Generally, your liability insurance will pay for the following:

  • Another person’s personal property damaged by you or legally attributed to you 
  • Medical expenses and costs for someone you injured 

Do I Need A Liability Insurance

Depending on the situation, you may be legally required to have liability coverage.

For instance, in most states, the law requires that you carry liability insurance to be able to legally drive your automobile.

As such, if your state laws require that you purchase liability insurance to drive your car and have minimum coverage, then you’ll need to make sure you have proper coverage when you drive your vehicle.

How Much Liability Coverage Do I Need

Every person’s financial situation is different and how much liability coverage you need will depend on your unique circumstance.

In general, you want liability to protect you against legal costs and expenses should you be held liable for causing damages to another person.

At a minimum, you’ll want enough liability coverage to be able to pay for damages that another party suffers so you don’t have to dip into your personal assets and savings to pay out of your pocket.

If you undertake risky activities in your life, you may want to consider purchasing an umbrella policy to provide you with additional coverage if your insurance policy limit is not enough to compensate for damages caused to another.

How Much Does Liability Insurance Cost

The cost associated with liability insurance and the premiums you must pay will vary from one person to another.

You may get the exact same coverage as someone else but pay more (or less) in premiums as the insurance companies look at your unique characteristics to give you an insurance quote.

Typically, the cost of your premium will depend on:

  • The liability coverage you take
  • The amount of deductible you choose
  • Your past claim history  
  • Where you live 
  • The nature of activities you do

If you are taking a car liability insurance, your premiums will depend on how many miles you drive in a year.

What Does A Liability Insurance Cover Takeaways 

So there you have it folks!

What is covered under a liability insurance policy?

What does car liability insurance cover in simple terms?

There are many insurance policies that include “liability insurance” giving you protection against damages caused to another person’s property or bodily injuries should you be held liable for causing the damage.

For example, in the United States, liability insurance is an essential part of every car insurance as many states (not all) require drivers to carry liability insurance.

The main objective of liability insurance is to give you financial protection for causing damages to someone else’s property or physical body for reasons attributed to you.

As an example, you invite guests over to your house and someone falls down the stairs getting hurt.

If you were to get sued or asked to pay for that person’s medical expenses, your liability coverage can help cover that cost.

Every person’s situation and needs are different, the best thing you should do is to contact an insurance agent so they can help explain to you what’s covered under a liability insurance policy.

I hope I was able to answer your question about what liability insurance policies cover and what’s excluded.

Good luck in your search!

Let’s look at a summary of our findings.

What Does Liability Insurance Cover Summary

  • A liability insurance policy is a type of policy that provides you financial protection when you cause damages or harm someone else 
  • You are covered for damages that you cause to another person’s personal property 
  • You are also covered for medical bills and expenses paid by someone in an accident if it was caused by you
  • Keep in mind that your liability insurance covers other people’s damages and injuries, not yours
  • To protect your own personal property and get protection for medical bills, you need to get specific coverage for that
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