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Skipping This Car Insurance Coverage Could Cost You Thousands

automobile accident

Not having liability insurance at any moment could be a financial mistake. Image credit: ganeshaisis via Flickr. Creative Commons license

If you ever find yourself behind the wheel, you’ve likely spent some time in front of the computer shopping auto insurance rates. This can be a confusing process as there are a no shortage of insurance products offered at a several different limits and premiums.

For some drivers, comprehensive and collision coverage may not make financial sense if the value of your car isn’t very much. However, liability insurance is required by law and not having the appropriate coverage can lead to personal and financial hardship. It’s important to note that minimum liabilities are unique to each state and your local trusted insurance agent is a great resource for your state’s requirements.

What is it?

So what exactly is liability insurance and who or what does it cover? Car liability insurance is similar to other forms of liability coverage in that it insures the policy owner against third party claims. It doesn’t cover losses incurred by the policyholder, but it does protect you in an at fault accident from coming out of pocket for damages to another up to your policy limits.

There are usually a wide range of policy limits offered by most companies ranging from state minimum coverage to upwards of hundreds of thousands of dollars. For some, state minimum may be the option that makes the most sense. For some people, state minimum liability may be the option that makes the most sense. However, increasing your liability coverage usually provides the best value in protection and provides a much needed level of protection when medical bills and property damages continue to mount.

Larger Protection and Coverage

For example, lets say you’re at fault in an accident and you carry the state minimum liability of  10/20/10. The first two numbers (10/20) refer to the bodily injury liability limits to help pay for injuries or death to another. It is read as $10,000 paid to each person with a maximum of $20,000 per occurrence. The final “10” refers to the $10,000 worth of coverage for property damage in an at fault accident. In this scenario lets say the vehicle you hit resulted in a total loss


All Etsy videos are created under the Creative Commons license. Via www.etsy.com/shop/classicwrecks

and was valued at $30,000. Lets also assume there were two occupants inside with each accumulating $15,000 in medical expenses for a total of another $30,000. Your state minimum liability only covers $10,000 for each person and $10,000 in damages to the other driver’s car/property. This only accounts for half of the $60,000 in damages incurred by your at fault accident. So who pays the additional $5,000 for each person’s medical expenses and the other $20,000 in the value of car?

That would be you, and if you aren’t in a position to write a $30,000 check increasing your liability limits is a wise option. A large increase in liability protection can usually be purchased for a relatively small increase in premium.

What else does it cover?

old car wreck

Old car wreck in Solitaire, a small settlement near the Namib-Naukluft National Park. Photo via http://500px.com/

In most cases, liability insurance also includes the legal costs of defense when there is a lawsuit involved.

That is a very valuable component in the event a settlement is not reached and a case goes to trial. Having higher liability limits that provide added protection may be optional, but not carrying any liability coverage is not. If you are involved in an at fault accident without insurance you will be paying for all damages out of pocket.

In addition to this, you will receive a ticket for no insurance that can be rather expensive. You may also have your license and/or registration suspended and be forced to pay hefty fines to get these items reinstated. Each individual’s circumstances may be different but it’s important for everyone to avoid the ranks of the under-insured and uninsured.

Doing so can be a great step in protecting your accumulated wealth and helping to ensure a strong financial future. For anyone with questions regarding their personal coverage, the first step to a more secure future is to consult a licensed insurance representative in your area.

Brian Levesque

Brian Levesque

This article was written by Brian Levesque. Brian has unfortunately had his fair share of auto accidents but luckily he has always had proper coverage. He is professional writer for Insurance Land and uses his experiences to help his readers make more informed decisions. To read more of his work, visit his Google+ page!

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