Motor vehicle liability insurance offers two different levels of protection – liability insurance for personal injury and liability insurance for property damage.
Liability insurance for personal injury
This type of liability coverage can pay someone else’s medical bills plus their personal injury expenses and lost wages after you’re found guilty in a car accident.
Not only can this coverage pay for medical expenses, but it can also help pay legal costs if you are sued after an accident. However, payouts only go up to the liability limits of your policy. You are still responsible for amounts in excess of your insurance policy.
Liability insurance for property damage
This type of liability coverage helps pay for repairs if you damage someone else’s property, including their vehicle.
This type of coverage can also be used for repairs to other types of property that you damage, such as a fence or a building you are crashing into.
When purchasing car insurance, keep in mind that the limitations of basic liability car insurance may not be sufficient for certain types of car accidents. If you cause an accident that is beyond the limits of your policy, you are still personally liable for additional costs and damages. If you are unable to meet these financial obligations, there may be legal consequences such as garnishment of wages or liens on your assets.
Ultimately, that’s the compromise you’re making when you buy liability-only auto insurance with limited coverage. This type of insurance helps drivers meet legal requirements in their state at the lowest possible cost, but it can also leave you financially vulnerable if you’re involved in an accident that results in costly medical bills, property damage, or both.
Related: Liability vs. comprehensive vehicle insurance
So read the limits of motor liability insurance
Individuals purchasing liability-only auto insurance need to understand the policy limits of this type of insurance and how it works. Generally, insurers package personal injury and property damage in an easy-to-understand format that looks something like this: 25/50/10.
With liability insurance with 25/50/10 limits, the policy offers:
- $25,000 in personal injury liability insurance per person
- $50,000 liability insurance for personal injury per accident
- $10,000 property damage liability insurance per accident
With 50/100/25 limits, on the other hand, the policy offers:
- $50,000 in personal injury liability insurance per person
- $100,000 liability insurance for personal injury per accident
- $25,000 property damage liability insurance per accident