Liability auto insurance is required for most drivers, but what is it and how does it work? Essentially, your car pays for damages caused to another person or entity. The policy you choose should be comprehensive enough to cover all these costs, but you should also consider a few factors.
Limits
Your liability limits are determined by what your state requires for your auto insurance policy. It also depends on your wealth and financial situation. If you’re on a budget, you’ll have to settle for the minimum limits required in your state. However, if you have significant assets, you should consider higher limits and perhaps add an individual umbrella policy. This will give you an extra layer of security in the event of a crash.
Bodily injury liability coverage pays for any medical bills and any loss of income or pain and suffering for the injured party. Property damage liability pays for damage to other people’s property or vehicles you hit. It also covers the cost of replacing a damaged storefront or fence. The amount you need to pay for bodily injury and property damage will vary from state to state, but in Illinois, it’s usually $25,000 per person, $50,000 total, or $20,000.
When choosing liability limits for your auto insurance, you should consider the amount of coverage per accident. This limit should not exceed the maximum limit of your insurance policy, as this may result in you paying more than you should. For example, if you hit someone and their car is worth $10,000, your liability limit should be at least $20,000. If you hit a pedestrian in a crosswalk, your limit should be $25,000.
Exclusions
An auto insurance policy has a section called “exclusions”. This exclusion is intended to avoid overlap between coverages and to assign all risks to the carrier. This includes driving a car for business purposes, riding in a rideshare, and making deliveries. The use of auto qua auto is also an exclusion. If you are in the delivery business, make sure you get special support.
Additionally, coverage varies widely. Generally, a liability auto policy has a set of exclusions. The purpose of this exclusion is to limit coverage to risks that underwriters do not choose to underwrite. Each exclusion has a width and a root difference. Most insureds ignore the breadth of exclusions, but understanding them is important to understanding coverage. For example, if the other driver used force, the injured party may not receive any compensation for the injury.
Similarly, auto liability insurance policies have limited named driver coverage. The named driver exclusion will be valid for the time being, but the endorsement language must specify that the total exclusion is limited to situations where the other driver has alternative liability insurance coverage. The named driver must also have a liability insurance policy. These are just a few examples of different types of exclusions. If you are unsure whether a particular exclusion applies, consult your insurance agent.
Additionally, some insurance policies will also exclude certain actions of household members. These actions or behaviors may prevent legal action or payment from the insurance company. The easiest way to exclude a driver is to name him in the exclusions in the policy.
Price
The cost of liability auto insurance depends on several factors, including the make and model of your car, any custom work, and your driving record. If you have a history of tickets or accidents, your liability auto insurance rates will be higher than average. Your insurance company may also increase your rates by 20% or more. To find the cheapest policy, get several quotes and compare them. ValuePenguin’s analysis relies on public data and insurance rate data from Quadrant Information Services. However, individual quotes may differ from the quotes presented in this article.
The cost of liability auto insurance can vary widely from state to state, and it’s important to note that average rates do not reflect state minimum limits. For example, liability coverage in New York is twice as expensive as in New Mexico. In contrast, Erie offers the cheapest liability coverage, at $371 per year. Many companies sell liability car insurance at prices below the national average. Additionally, your final rate will depend on your driving record and the limits you choose.
