The Different Types of State Liability Insurance Available

Liability insurance pays damages to other people and their property caused by the negligence of an insured person. There are many types of auto insurance liabilities.

Three types are included in a standard policy:

  • Bodily injury and property damage liability covers injuries to other people and property damage to their auto. This basic auto liability fulfills the statutory requirements of financial responsibility to operate a licensed vehicle, or higher limits can be purchased.
  • Uninsured motorist coverage pays the policy owner for damages when the other driver is uninsured.
  • Underinsured motorist coverage pays losses in excess of the other driver’s liability coverage in the event of a catastrophic claim.

The traditional liability plan covers the costs of at-fault accidents, referred to as a “First Party” policy.

Additionally, some states have a “No Fault” liability system for smaller claims. With this type of arrangement, the auto owner buys insurance, has a fender bender, and then collects under his own policy. The system is based on lowering claims costs by avoiding the determination of liability.

A no-fault system differs from a state plan. A state plan is an “insurer of last resort,” which means if the driver cannot find insurance in the standard market, the state will issue a policy. Commercial insurers participate in the profits and losses of the assigned risk pool.

Medical payments coverage is not liability coverage. Medical payments coverage reimburses, as an accommodation, small medical amounts for injuries involving an insured vehicle. This coverage would include incidents such as fingers pinched by a door as well as the result of an accident.

Although the various types of auto liability insurance can be confusing, the simple reason it exists is to protect your assets when you are liable in an accident.

How Are You Covered Under Minimum Auto Liability Insurance?

Under minimum auto liability insurance, a requirement of all states, individuals have very little protection. Under most state laws, drivers must carry a specific amount of auto liability insurance. This insurance provides protection to other drivers who you may be involved in an accident with. It provides you, as the driver, with protection from the financial hardships of trying to pay for this type of damage on your own. However, there are numerous limitations to know about.

What Is Covered?

The first thing to know about liability insurance for your auto is that it provides coverage for damages you cause or are otherwise responsible for after an incident. It may cover damage to another vehicle or the property of another person. If you run over someone’s mailbox, the repairs to the mailbox are covered. If you are in a car accident with another vehicle, the costs related to the repairs for that vehicle are covered.

What’s Not Covered?

Most of the time, these insurance products do not provide you with a large amount of coverage in terms of your own property. For example, the damage to your vehicle form hitting another car or running over the mailbox are not included. This also means any damage to your health is not included. These you will need to pay for yourself unless you have additional policy protection.

How Much Is Covered

It is also important to realize that under minimum auto liability insurance, the insurance company covers damages up to the amount of coverage you have. If you hit a $50,000 car and ruin it but your policy is only for $30,000, you are personally, financially responsible for that other $20,000 worth of damage. For this reason, it is a good idea to have more than the minimal amount of insurance. You likely need to have more than what your state requires as minimum.

Are you sure the insurance coverage you have is enough? In many cases, it will not be unless you take the time to talk to your agent about your specific needs. Having enough insurance is critical. It is also necessary to have the right provider for your policy needs. Do not overlook the importance of this type of insurance. It keeps you legally able to operate a vehicle, but it also gives you financial protection from many "what if" situations that could occur.