What Is Liability Insurance Coverage: Stay Protected
Insurance is something many people purchase with the intention of never using it. At least, we purchase it in the hopes that we never need to use it. There are many different types of insurance options, along with different coverage options and costs.
It is helpful if you understand as much as you can about the various types of insurance to ensure that you purchase the right type and amount for yourself. This is especially true for auto insurance and liability. The details change from state to state, making it easy to get confused and uncertain whether you have all the coverage you need. Continue reading to find out all you need to know, including what is liability insurance coverage.
What Is Liability Insurance?
When you want to know what is liability insurance coverage, it is essential to understand the details about liability insurance first.
Liability insurance protects the person insured from claims filed by individuals claiming they were injured or property was damaged. Liability insurance also covers legal costs for those who are found liable legally. Liability insurance does not cover damage that occurs intentionally or liabilities resulting from contracts.
When liability insurance is paid out, it goes to third parties and not the insured individual. Personal liability, commercial liability, and worker's compensation all fall under liability insurance. Liability insurance is typically required for certain types of insurance, like car insurance policies and those practicing medicine.
What Is Auto Liability Insurance?
Auto liability insurance covers damage that happens as a result of auto accidents. This includes two different types of coverage. This includes damage to property and injuries that happen to individuals:
Property damage is when there is damage to someone else's property. This includes vehicles, light poles, yards, or any other property. This can include providing a rental car when someone's car is being repaired due to an accident. It includes diminished value. This is the difference between the value of the vehicle prior to the accident, and the value of the vehicle after the repairs were finished.
Bodily injury covers injuries that one person receives as a result of an auto accident. This may provide coverage for medical bills, medication, pain and suffering, and loss of wages. Every state has different regulations about who can file and claim for bodily injury and who cannot.
What Are the Types Of Liability Insurance?
When you are wondering what is liability insurance coverage, it is helpful to know the main types of liability insurance. These types of liability insurance include:
Worker's compensation and employer liability
These are mandatory for employers. This protects a business from any liability that may arise from injuries or death.
Product liability
It is ideal for those that manufacture products that are sold on the market. This insurance protects businesses from lawsuits that result from death or injury because of the product.
Indemnity insurance
This one is a coverage protecting businesses from claims of negligence that may cause financial harm based on mistakes or a failure to perform.
Director and officer liability coverage
Insurance coverage for the board of directors is called director and officer liability coverage. This protects them from the company being sued. This is extra protection for executives at corporations to provide them with some amount of personal protection.
Umbrella liability
This one is a policy that protects against catastrophic loss. This policy usually provides coverage once other insurance policies have reached their liability limit.
Commercial liability
It is a standard policy that is also called comprehensive general liability. This insurance provides protection from lawsuits that occur from damage caused by an employee. It can also provide protection when employees are negligent. This type of insurance can include slander, libel, intellectual property, tenant liability, and employment practices liability.
What Are Coverage Limits?
The amount your insurance company pays out in a liability insurance claim depends completely on the limits you choose for your coverage. Every state has a minimum amount of coverage that an insured individual must purchase when it comes to liability for bodily harm and property damage. You can always opt for more coverage above the state requirements.
There are three limits for liability coverage:
The property damage liability limit is the highest amount an insurance company will pay to repair the damage that occurs to another person's property. The maximum amount that is paid does not exceed your insurance policy limit.
The bodily injury liability limit is the highest amount that is paid for each person injured in an accident which you caused.
There is also a bodily injury liability limit for each accident. This limit creates a cap on the full amount paid out by an insurance carrier for medical expenses for other people as a result of an accident you caused.
Most often, bodily injury and property damage limits are packaged together. When it comes to making selections about coverage limits, they may be packaged together. You may not be able to separate the limits.
How Much Does It Cost?
The cost of liability insurance varies based on many different factors. The amount of coverage you purchase will be a factor in the cost of your liability insurance.
The higher the limit of coverage that you select means the more you are going to pay for the insurance.
How Much Insurance Should I Get?
When it comes to making a decision about how much insurance you should purchase on your policy, there are many variables to consider. Ultimately, it is your decision to make when it comes to deciding just how much insurance you want or need.
You also want to make sure you have some idea about how much the coverage is going to cost. When you have costs that go above your limits of coverage, it is your responsibility to cover those costs. That means you have to pay for anything that exceeds your limits; you will pay out of your pocket.
For this reason, it is in your best interest to increase your liability insurance over and above the limit of your state.
Below I will highlight this example with numbers:
Suppose you are the cause of a car accident that injures two people in a different car. If you have a bodily injury liability limit of $25,000 for each person, and the bodily injury per accident is $50,000. Therefore, if the medical bills for each person are $10,000 ($20,000 total), you are most likely covered because the $10,000 per person is under $25,000, and the total accident cost is less than $50,000.
However, if you have the same coverage amounts, but the medical bills for the two injured people are $20,000 for one and $35,000 for the other, making the total accident cost $55,000. That means that person one is covered, but person two is $15,000 over your limit, and the total accident cost is $55,000; you would have to cover some portion of the bills yourself.
What Liability Insurance Does Not Cover?
There are some items that are not covered by liability insurance.
For example, it will not cover damage to your car caused by an accident that you caused. You will need collision coverage for that.
It does not cover damage caused by other things, such as a severe storm. Comprehensive coverage would protect you from costs related to that type of damage.
Liability insurance will not cover costs that occur as a result of your injuries from an accident where you are at fault. You would need medical payments coverage for those bills.
Still Need More Help?
Are you still feeling uncertain about what coverage limits you need? You do not have to worry. The Goalry Mall has you covered. Our financial mall has everything you need to help you reach your goals, no matter what they are. The Goalry Mall is the place to find articles and videos to provide assistance. We have a social community that allows you to connect with others that have the same goal.
No matter what question you have, Goalry Mall has the answer. We have an Insurry Store where you can learn everything you need to know about insurance. If you have insurance and liability questions, the Insurry Store is the place where you will find answers.
Conclusion
Insurance is confusing, but it is also important. This makes it stressful and challenging. You want to make sure you have all the coverage you need, but you do not want to spend a ton of money for coverage that you will never use. Once you understand the different terms, insurance becomes a little less confusing.
From there, you can understand what is covered and what is not. Then there are the coverage limits of which you should be aware. Once you understand all of that, you must make the important decision about how much coverage you need. While you can find insurance professionals to guide you, ultimately, it is your decision to make.