Many People ask me “How Does Auto Liability Insurance Work?”

Why don’t we watch following video to make things clear

Basically there are 2 types

1. Bodily injury liability
2. Property damage liability

Bodily injury Liability is designed to pay the medical expenses and lost wages in the event of an accident. There are two set limits on bodily injury auto liability insurance. One limit is the amount that will be covered for each person that is injured in an accident. The second limit is the total amount that your insurance company will pay for the entire claim.

To be very precise According to Definitions of bodily injury liability on the Web:

• Insurance coverage that protects the insured against financial loss when a person is held liable (legally) for injuring other individuals in an auto accident. Bodily Injury Liability also protects the insured against the cost of legal defense.
  guidetocheapinsurance.com/Auto-Insurance-Glossary.php
• An agreement by a company to protect an insured against loss from legal liability for injury to another person arising from an automobile accident. This is usually referred to as “third party coverage.”
  www.giis.org/glossary/glossary.shtml
• Any liability that may result from the injury or death of another person.
  www.autotrader.com/help/glossary.jsp
• Motor vehicle insurance that pays court awarded damages for bodily injury, up to the face value of the policy, if the injured person is judged liable for a motor vehicle accident.
  www.crfonline.org/orc/glossary/b.html
• Coverage designed to pay claims against the insured if found at fault in an accident causing injury or death. Minimum California state Bodily Injury Liability requirement is currently $15,000/$30,000.
  www.bigdansinsurance.com/terminology.htm

whereas

Property damage liability insurance pays for damage that is sustained to someone’s property. This also pays for an attorney and the settlement if you are sued. The limit of property damage auto liability insurance will probably be the same amount as your collision and/or comprehensive limits.

So you may ask

Will property damage liability coverage cover your car for theft and fire?

and the answer is

No, only “comprehensive” coverage would pay for that. Liabiility AKA PLPD AKA property damage and liability ONLY covers other vehicles you may damage in a crash YOU have caused.

Understanding Auto Liability Insurance Numbers

Most states define auto liability insurance in terms of a series of three numbers. For example you might see a series of numbers that look like this: 10/20/30.

• 10 – This signifies the maximum amount, in thousand of dollars that an auto insurance company will pay out for each person that is injured.

• 20 – This is the maximum amount, in thousands of dollars that an auto insurance company will pay out for all bodily injuries in one accident.

• 30 – This signifies the maximum amount, in thousands of dollars that an auto insurance company will pay out for property damage.

These represent the minimum amount for a particular state. You may choose a policy that will pay out more in the event of an accident since medical expenses can reach in the thousands of dollars, but this will increase the price of your monthly insurance premium.

Reference:

1. http://wiki.answers.com/Q/Will_property_damage_liability_coverage_cover_your_car_for_theft_and_fire
2. http://www.carsdirect.com/car-insurance/how-does-auto-liability-insurance-work
3. Google

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