If you are an American citizen and a car owner, you need basic car insurance to drive your car legally. If you fail to do so, you may end up being fined for an illegal offense. Well, if you have bought a new car, and don’t have much know-how about basic car insurance, we are here to explain to you everything about it in detail.
Before we move forward, let us inform you that basic car insurance is liability insurance. However, the minimum cost of car insurance and car insurance policies vary from state to state.
Let’s have a look at what is liability insurance for a car and why it is mandatory for car owners.
What is Liability coverage?
Liability Insurance is one of the basic types of car insurance that you have to incur for a complete coverage policy. It will protect you from the costs of the third party expenditures if you get into an accident. Fortunately, if you are at fault, you won’t have to worry about paying for the medical or property expenses of the other party from your pocket.
Hypothetically, if you get into an accident and it’s your fault, whatever the damages incur, be it damaging someone else’s property or causing injuries to the driver or passengers of the opposite party, your insurance company will pay for the expense.
As of now, you have fully understood what is liability insurance for car. Let’s see what does it cover, to what extent does it protect you, and what are the requirements to be eligible for this plan.
What does liability insurance cover?
Liability insurance for car covers two major aspects of auto insurance: bodily injury and property damage.
Bodily injury liability coverage protects you from all the costs of the medical bills or funeral costs of the third party in case of a collision between your and their vehicle. However, you must know that it will only cover the costs if you are at fault. If you aren’t at fault and the third party has no coverage to protect them, then you can use your uninsured driver coverage to fulfill their costs.
Property damage liability insurance will cover the costs of the third party’s property damage that your vehicle may have caused. It could extend from replacing their vehicle to getting the damaged pole fixed. Again, this will also cover the costs only if you are at fault.
Above mentioned coverage are two major protections that a policyholder must have in their liability policy. However, the insurance policy coverage has a limit to protect your interest. If you exceed the limit, you may have to pay the extra amount from your pocket.
What are the limits of Liability coverage to protect your interests?
Having liability coverage doesn’t mean that there are no limits to it. The limit of protection will depend on the level of coverage you choose when you buy the policy.
Let’s understand this with an example:
You have bought a liability car insurance that offers $80,000 for bodily injury liability and $170,000 for property damage.
If you get into an accident and unfortunately you are at fault, then you may have to use your liability insurance to cover the costs of the third party’s expenditure.
There were three passengers and a driver in the car that your car collided with. The medical bill of the driver is around $15,000 and the medical cost of other passengers is accumulative of $50,000 (approx). In this case, your insurance company will give you full protection.
The reason being, the accumulative medical cost of each person is lesser than the coverage amount. However, if the total cost of the medical bill exceeds more than $80,000. For example, if it is around $ 90,000, then you will have to pay those extra $10,000 from your pocket.
Similar is the case with property damage. If the cost of repair exceeds the signed amount in your contract, you must bear all the extra bucks.
Eligibility criteria for Liability Insurance Policy.
Liability insurance is the basic car insurance, and you must get it before you take out your car for a drive. It is illegal to drive a car in the US without basic car insurance. Therefore, if you have a car, you must fulfill the requirements for liability auto insurance. Other than that, eligibility criteria include your driving history, your age, etc.
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