personal injuries, car accident

What liability car insurance? (Best explained)

Did you just buy a new car and you are wondering what risks you should insure your car against? Have you been blindly buying and renewing your insurance coverage without taking a minute to understand what you are paying for? This article does not only answer the question ‘What liability car insurance?’, but it also goes beyond the basic knowledge and answers all related questions about liability car insurance you could ever think of.

Simply, liability car insurance is one of the car insurance coverage you will need to cover if you are deemed at fault in a motor vehicle accident. Should you injure people or damage a vehicle belonging to the other driver, liability coverage is there to protect you.

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Whats liability car insurance?

car accident, hit and run, personal injuries
car accident

Of course, there are many types of insurance coverages you can buy to protect your car and financially protect yourself. Some of the coverages are mandatory, while a couple of others are optional.

You will need to be equipped with adequate knowledge because, as I have always said, all insurance companies are out there to squeeze customers for maximum profit. This is a reason why companies get in a scramble and partition for customers only to make them cry should the customers attempt to file claims after car accidents.

Types of car insurance cover

There are many types of car insurance policies your agent or company will probably list for you. You will need to know in advance all the insurance needs before attempting to buy auto insurance. For instance, auto coverage needs for someone driving an old car are different from when another person is driving a brand new car.

Types of car insurance coverages include:

There is also additional personalized insurance coverage you will probably need depending on the type of car you are driving and how much protection you need as an individual. 

How does car liability insurance work?

Assume you just gotten involved in an auto accident and unfortunately you are deemed the at-fault causer. You will need to pay for all the damage costs done to the other car, and meet additional medical and other accident-related costs like lost income.

If you are the guy who has been driving around with no or insufficient liability insurance coverage, you will be sued to pay for all damages caused from your own pockets. You will sell all your property or empty all your savings just to compensate the other driver (third party). At worst they could even attach your future salaries or will be forced to apply for bankruptcy.

To avoid such financial messes, carrying liability car insurance helps to cover such expenses. If you are living in the united states, driving any car uninsured is illegal except in just 2 states where liability insurance is not mandatory.

What auto insurance do I need?

To drive in any state, you are required to provide proof of financial responsibility. They are 2 ways to do this;

  1. By buying car insurance.
  2. Post bonds over $50000 with your state.

Without a doubt, the cheapest of the 2 above is buying car insurance. In the USA, the average cost of full car insurance is around $1700 averaging $148 monthly.

How much liability do I need?

liability car insurance
Liability car insurance

You have 3 options in case you need to buy liability car insurance.

  1. You can decide to go with your state’s minimum requirement. 
  2. You can decide to buy good coverage worth $10,000 per person injured, $300,000 for accident coverage (more than 1 person injured), and $100,000 for property damage.
  3. If you decide to have the best liability cover, go for $250,000 per person injured or $500,000 per accident, and $250,000 for property damages.

How much Uninsured/underinsured motorist coverage do I need? 

Some states declare the minimum requirement while others seem relaxed. If you live in a state where there is a certain amount of coverage required;

  1. You can decide to go with the state’s minimum values. 
  2. Good coverage here is $100,000 per person injured and $300,000 per accident (coverage when more than one person is injured).

How much Personal injury protection (PIP) do I need?

This policy covers your medical bills, funeral expenses for passengers injured in your car, and lost wages irrespective of whether you are at fault for the accident or not. The requirement for PIP varies from state to state so you can choose from the following options. 

  1. You can choose to buy your state’s minimum coverage.
  2. If you want good coverage, go for a $40,000 coverage policy.
  3. The best coverage is the maximum amount required by your state.

How much Collision coverage do I need?

I already told you from other posts that this car insurance coverage is optional so you can choose to carry it or drop it. This insurance policy helps to repair or replace your damaged car irrespective of being at fault for the accident or not. 

  1. There is no state where collision coverage is mandatory.
  2. I recommend you buy this coverage because it covers your own car.
  3. You should buy as much Collision coverage as compared to your insurance needs. For example, you would need much more coverage if you own an expensive vehicle.

How much Comprehensive coverage do I need?

car fire
car on fire

There are many losses or damages you can get that do not arise from car accidents. The comprehensive insurance coverage covers all non-accident-related losses like car theft, damages from vandalism, and damages from extreme weather conditions like hurricanes, earthquakes, and others.

Comprehensive auto insurance is not mandatory but I highly recommend it. According to the FBI, 721,885 vehicles in the USA were stolen in 2019, whereas 810,400 cars were stolen in 2020. Assume you just bought your $1 million gadget and it is stolen the next day! How about other damages like hitting a deer, extreme weather, etc? taking such risks is no good choice when your budgets are not tight.

What does liability car insurance cover?

Road traffic accidents can be huge involving multiple bodily injuries and severe car damages, or the accident could be minor like a fender bender or a simple rear-ending. Whatever the gravity of such an accident, you may be either deemed the at-fault driver or not. There are also situations where you and the other driver share responsibility for the accident.

Should it be decided you are the at-fault driver then your liability car insurance coverage will help you cover the following costs.

  • Repair the other vehicle you damaged. 
  • Pay for damages to any nearby property destroyed like buildings. 
  • Pay all medical bills for all the people injured in the other car. 
  • Pay/compensate for lost income to other people injured in the other car

Liability car insurance vs full coverage.

If you want peace of mind while driving your car, I recommend you buy full insurance coverage. Liability forms part of full auto insurance coverage. People carrying full car insurance coverage usually have the following benefits.

  • Personal Protection and safety of other people injured in the other car(third-party). 
  • Personal car protection.
  • The other car (third-party) safety and protection.

You will have the above protection only if you bought liability, collision, and comprehensive car insurance coverages. Since statistics have shown that more than 10% of drivers in the USA are not insured, your full coverage should be backed by uninsured/underinsured motorist coverage for maximum protection.

The average cost of full insurance coverage in the USA is $1,771 per year which translates to a monthly payment of $148 – report from Bankrate. If you are living in the UK, gocompare.com reports that the cost of car insurance in the UK is £526 annually.

Liability car insurance for rentals.

Does your personal car insurance cover car rental?

Are you planning for a long trip or tour? Traveled abroad and you need a car for a couple of days? Yes, car rental could be a better solution compared to buying a car. The average cost of renting a car in the USA is $71 a day but if you are smart, you can negotiate a $56 per day deal. According to kayak.com, it will cost you $94 per day on average for a car rental in the UK.

The above paragraph shows that car rental is miles cheaper compared to buying a car, after all, you only want to keep the car for a shorter period.

There are some car insurance companies whose policies cover car rental but you will need to confirm with your broker or insurance agent. On the same note, many car rentals rent out vehicles that are already insured so you may not need to buy car rental insurance unless you want more coverage. 

From the information gotten from my insurance broker, your rental agencies usually buy liability coverage for such rented vehicles. To my own understanding, this is not adequate coverage so you may need to buy additional insurance like a collision waiver and others.

Does credit card cover rental car insurance? 

Yes, your credit card should cover the cost of a rental car but I can not guarantee that every credit car company has this bonus service. What I know is that, if your credit card covers rental insurance, you will need to pay for your rented car using the same card, otherwise you won’t have that privilege.

Liability insurance is the type of coverage that is regulated by states or countries depending on where you come from. Each state or country has its own minimum liability coverage you will buy before driving your car. You have a choice to choose between buying the required minimum coverage or buying extra coverage depending on your insurance needs. 

From my own experience, your state’s minimum coverage is not enough to offer you adequate protection. For instance, the minimum required liability coverage in Texas is $30/60/25. This can be interpreted as up to $30,000 for one person injured 60,000 if more than one person is injured and up to $25,000 for property damages. 

Liability of car insurance in Texas

car insurance
auto insurance

A quick google search will reveal that, in Texas, the average car accident settlement cost (one injured person) is in the range of $15,000 to $2 million. Factor in costs for property damage and the amount you could be sued to pay if deemed at fault driver could go through the ceiling.

If you are deemed the at-fault driver in a car accident where multiple people were injured in addition to car damages, the required minimum liability of $30,000/60,000/25,000 won’t even cover a quarter of the expenses and therefore you must top it up using your own savings. Without a doubt buying extra liability coverage should be the smartest idea for you.

Does liability insurance cover my car if someone hits me?

If you are hit by someone and you are deemed not fault driver, the other person’s (who hit you) liability insurance will compensate you. If you are the at-fault driver, you will file a claim and be compensated by your collision car coverage. Your liability coverage of course covers the other driver whose car you damaged plus any bodily injuries sustained.

If you are hit by a driver with no insurance, you either sue the driver to pay from his savings directly (if he has money) or you will claim from your collision coverage or your uninsured/underinsured motorist coverage. Statistics have shown that uninsured drivers are usually broke so suing them for your compensation may yield nothing. Better buy your own adequate protection.

Is automobile liability insurance optional?

Apart from 2 states in the USA, All other states require minimum liability coverage. Each of the states requires a different amount of liability coverage so you may want to inquire more from your director of insurance services in your state.

If you are living outside the USA, I do believe there are a couple of mandatory insurance coverages too in your country. Buying car insurance coverage is a kind of financial responsibility that should be exhibited by every driver or car owner.

States where car insurance is not required.

Carrying car insurance coverage is not mandatory in all states in the USA. In New Hampshire and Virginia, you are free to buy car insurance coverage or not but you are still responsible for any accidents you are at fault for. If you cause an accident in those 2 states, you will be sued to compensate for the losses you caused and pay all medical costs in case people are injured.

Some states give you 2 options to show financial responsibility. The first option is of course buying car insurance. The second option is buying a bond worth the set amount. Should you have an accident where you are at fault, the bond you bought will be used to pay the other driver whose car you damaged and the people injured. You buy bonds by depositing cash. Some states will ask you to deposit more than $50,000 cash.

My car is totaled and I only have liability insurance.

totaled car
Totaled car

Any car accident or non-accident damages can result in your car being totaled (same as a total loss). Reasons your car is totaled include;

  1. If your car can not be safely repaired.
  2. If the costs to repair your car are higher than the market value of your car just before the accident.
  3. Some insurance companies just total your car to escape hidden costs or hidden claims.
  4. If your mileage is very high or if your car is more than 6 years, your car is highly likely to be totaled.

If your car is totaled in an accident where you are at fault, your liability car coverage won’t help to repair or replace your car. Liability car insurance pays the other driver whose car you damaged in the car accident. You will meet the cost of replacing your car from your pockets unless you carry collision insurance.

Liability limits car insurance

If you bought car insurance, do not walk away from the office without knowing the limit of the policy you just decided on. I earlier stated that in Texas, you are required to buy a $30,000/60,000/25,000 liability policy as your minimum coverage. Should you decide to buy what your state (Texas) requires, then the $30,000/60,000/25,000 will be the limit of your liability.

The above figures can be interpreted as; up to $30,000 per person injured or up to $60,000 if more than one person is injured. Up to $25,000 will be used to cover any property damages (cars, buildings, etc)

Should one person gets injured and medical bills go beyond the limit ($30,000), your insurance company pays the limit and you the covered person pay the remaining amounts. This is the reason why you should always buy adequate coverage that is probably higher than your state’s minimum requirement.

What happens if I don’t have enough liability insurance for a car accident?

If you are the at-fault driver in the car accident yet you have insufficient liability coverage, the following happens.

  1. The other driver will file a lawsuit against you and you will pay from your pockets. 
  2. The other driver can spare you by filing a claim for compensation from his own insurance company. sometimes his insurance company could go after you to recoup its money.
  3. The other driver can file a claim against his underinsured motorist coverage.
  4. The courts of law could attach your future income. 
  5. You sell your property and pay the claimant and legal fees.
  6. You can apply for bankruptcy.

Do not accept all the liabilities listed above. Always buy much more liability insurance because you do not control what the third party demands. I have heard a case where the at-fault driver is asked to pay monthly lost wages for the person injured. 

Should I get liability-only car insurance?

No, never, unless you do not have money. Liability car insurance does not cover your car after an accident but only collision coverage does. Liability also does not help if your car is stolen, damaged by vandalism, extreme weather calamities, falling trees, and if you hit a wild animal. Always aim at having full coverage by buying comprehensive, collision, and liability.

But if you are in an economic crisis, carrying liability coverage is better than having no coverage at all. You can decide to park your damaged car till you have enough bucks for repairs. The other driver whose car you damaged cannot forgive or wait for you.

Fully comprehensive car insurance driving another vehicle

car hit deer
car-deer accident

A couple of years ago, a person with fully comprehensive car insurance was allowed to drive any car. Comprehensive coverage had a clause that let you drive any of your friend’s cars with no worry. This clause gave you third-party benefits (not the same as third-party coverage) only.

Such clause (DOC clause) has since been removed and comprehensive policy does not cover any damages you incurred while you are driving unless you hit a wild animal. If you want to drive others’ cars, let them add you as a named driver in their policy otherwise you will not be covered. You can check your certificate of insurance for any DOC clause or get information from your insurance company.

what is 'short-term' car insurance?

If you want a policy that will allow you to drive any car, go buy a short-term car insurance policy. This policy lasts you for a day up to 30 days and you will be covered while driving any car. There is also an insurance policy called ‘Any driver’ policy where any person with your permission will be covered driving your car.

what is any driver's car insurance?

With ‘any driver’ car insurance coverage, whoever drives your car is automatically covered. ‘Any car’ insurance policy is damn expensive because the company has no way of knowing how risky are the drivers. You will end up being charged very high car insurance premiums. If your son/daughter is returning from school but they are not named drivers on your policy, consider purchasing a ‘short-term’ insurance policy to allow them to drive your car.

Does full coverage car insurance replace your car?

Just as a reminder, full coverage car insurance consists of comprehensive, collision, and liability car insurance coverages. If you are the at-fault driver in the car accident, your collision coverage will replace your car should it be totaled. Collision car insurance carries a deductible so be ready to pay it before the company pays the rest amount. 

If you suffered non-accident losses like car theft, vandalism, etc, comprehensive coverage replaces your damaged or lost car. Just like collision, comprehensive carries a deductible too.

If you had an accident where you are not at fault, the other driver’s liability insurance will replace your car. Good thing is that you will not be asked to pay any deductible. So the answer is yes, a full coverage policy replaces your car should it get declared a total loss.

Does full coverage cover at-fault accidents?

insurance policy
Insurance policy

Yes, the type of policy within full coverage that covers at-fault accidents is liability car insurance. Liability covers the following;

  1. Cost of repairing the other driver’s car you damaged. 
  2. Injuries to any person in the other car.
  3. lost wages for any person injured in the other car.
  4. Funeral services
  5. Rehabilitation costs and others.

 

In summary, liability car insurance is the policy your state or country requires you to have before driving your car. It does not cover you but covers any person who is injured in the accident you caused. It also covers repair costs or any property damage in the same accident where you are the at-fault driver.