Insurantly | 15 Common Liability Insurance Questions

liability insurance auto

What is liability insurance?

Liability simply refers to what you have to pay to another in case you cause an accident to happen. The damage could be to property or person and you could have not intended for the accident to happen, but it did. Car insurance liability covers you but only up to the amount stated on the policy.

If the cost is higher, you will have to pay for it out if your own pocket. Also, there may be a deductible charge that you must pay the insurance company before they issue out payment. The amount of the deductible, if any, will depend on what you agreed upon when signing the policy.

As for injuries or damages you sustained personally, liability insurance does not cover this. This includes personal property like your car and injuries that led to medical treatment. Also, liability is a mandated cover for most states. The liability coverage amount would depend on the car, model, year, driver’s history, credit score, and whether the car is on loan or fully paid, among other factors.

The general rule is to get higher liability coverage if you drive an old model and don’t really have a lot of extra cash to pay for the cost of repairing a new car model owned by someone else.

Why should I have liability car insurance?

First of all, liability insurance is mandated in almost all states. If you rear end another car, the costs is on your hands. Instead of going through legal remedies to have the car repaired, the other car owner can safely rely on getting at least a portion of the cost from your insurance company. Plus, you could be the “the other guy with the damaged rear.”

In addition, it helps you cover the cost instead of having to shell out-of-pocket a large amount which you may not have to begin with. Then there is the other possible cost of a more serious road accident that may require medical treatment by the passengers of the other car which, if you are at fault, you must pay for. Even if you don’t have enough on your insurance policy, the other party has the option of filing a legal case against you for expenses incurred. In most cases though, lawyers will work for a settlement rather than a drawn out court case. Either way, you end up with unexpected expenses which could have been covered with a well-thought out car insurance liability plan. Keep in mind that medical costs are continuously on an upward trend especially in the last few years.

How often do insurance companies deny liability?

Most people would tell you that insurance companies would deny as many claims as possible but it’s simply not true. There is a process they follow the results of which must be explained and justified with real evidence, not gut feeling. Thus any claim that is denied goes “through the wringer” so to speak.

Each auto insurance company has its own figure on denied claims and if they should happen to have too many of these, they could go under scrutiny and review by the state’s insurance department.

However, to understand why a claim is denied, here is a list of the basic factors in an insurance company’s claims assessment:

• No pay case – the case of where fault should be levied on is unquestionable and not caused by the policy holder
• Comparative Negligence – This breaks down who is at fault by percentages and if the injured person is more than 50% at fault, the claim is denied
• Comparative Negligence Part 2 – If the person claiming is partially at fault, the insurance company can pay partial of the claim only or reduce the amount by 20, 25, 0r 30%
• Shared Responsibility – This refers to the justification that both parties claim from their insurance companies if they are both at fault.

What does certificate of liability insurance cover?

Just as a diploma is proof you graduated from a certain school, the certificate of liability is your proof that you are insured. It is a document that contains the basic details of your insurance policy such as name insurance company, name of insured, listed persons under the policy, date it became effective, expiration date, and policy number.

You may be asked to present this when you are involved in a road accident as proof that you can cover the costs should you be found to be at fault. The no fault driver may want to list down the details on the certificate of liability or even request a copy for whatever purpose he may need it for.

This certificate is what can be kept in your car instead of the bulky policy document. Since it is an important document, you might want to have a photocopy made for your files.

The certificate of liability is also required as proof of coverage for loans or if you plan on selling your vehicle. Of course, the coverage is not transferred to the buyer’s name but the buyer would probably want to know if the car’s insurance is active and maybe even other details regarding claims that have been made on the car.

Does my liability insurance cover rental cars?

Your personal liability insurance may cover rental cars but it’s not a given. Every insurance company has its own policy regarding this so you will have to check your policy or call your provider.

Also, you have to check the rental car contract because they too have their individual quirks. For instance, they don’t even use the same terms in their contracts so it can be confusing if you plan on renting cars periodically.

That being said you should go ahead and look for specifics on physical damage coverage on non-owned cars in your car insurance policy. This would cover rental cars as long as the clause does not limit coverage to private, non-owned cars. Also, this would apply if you have physical damage coverage. If it is just liability, then any physical damage to the rental car would not be covered by your policy.

Non-owned vehicles may also not include motorcycles, trucks, jet skis, U-haul, or other similar types of vehicles. For clarification on these, you will need to contact your insurance broker.

In addition, there are some states that give coverage for rentals under the liability policy but it would generally be very limited. Getting insurance from the rental company would allow you to have a higher cash value and could cover the physical damage costs adequately.

If your car is paid off should you just have liability insurance?

Yes, at the very least because it is required by law in almost all states although this is not always the best action to take with insurance. You need to ask yourself a few questions on personal finance such as:

a) Can I afford to buy a new/used car if my current car gets totaled?

b) Can I afford to pay for out of pocket repairs?

c) Do I have enough funds to cover me for when the car is being repaired?

Also, you need to find out if your state will allow just liability coverage. Keep in mind that driving a car on public roads is a social responsibility. Any accident you cause will put others at risk and in an unexpected situation. You will not be able to just walk away with an apology, no matter how sincere that may be. Aside from expenses incurred by both parties, there is also the penalties, fines, and after-effects of the accident like an increased premium.

In many states, liability is just one of the required coverage for car insurance. There are 5 other types although PIP and bodily injury are the types most likely to be required aside from liability.

Is there a deductible for liability insurance?

No, there is no deductible amount in most cases for the basic state mandated auto liability insurance. If you happen to live in a state that does not require a minimum liability insurance, then you can skip this altogether. However, if you add coverage to go beyond the basic minimum, the insurance company will charge you a deductible accordingly. The rate of the deductible will depend on the insurance company, the added coverage limit, and your personal decision. You can decide to pay higher or lower and this decision will affect your monthly premium. The higher the deductible, the lower your monthly payments will be and vice versa. It’s a choice that must be made based on your finances and the amount you can afford to pay monthly.

If you do decide to upgrade from a basic minimum liability coverage, there are 7 types of liability car insurance and if you get comprehensive or collision coverage which would mean getting all types of liability coverage, then you will have to pay a deductible.

The deductible amount can range from $250 to $1,000 or more but the average is pegged at $500. The 7 types of liability insurance under full coverage are bodily injury liability, medical, PIP, property damage liability, comprehensive, collision, underinsured and uninsured motorist coverage .

Liability insurance in my state how does it work?

Auto liability car insurance is the only car insurance that is legally demanded of every car owner in all but 2 states. There is no standard limit or base figure for all states so you will need to contact any one insurance company in your area about the minimum requirements. It is also possible to look up the website of the state’s insurance department which oversees all insurance companies in the state.

This coverage is required when you register a vehicle with the DMV. Without a current insurance policy for the vehicle you will not be allowed to drive the vehicle. If you do, it will result in penalties, fines, a suspended driver’s license, and even cause your vehicle to be impounded. The only way you can get your vehicle back is if you comply with the state’s criteria which include the insurance.

Once you have your liability insurance, make sure you have the certificate of liability. This document should be kept in the car as proof that your car is covered by insurance. It will be demanded from you if ever you get pulled over or you figure in a road accident. Finally, this insurance is renewable annually and you have the option of increasing coverage.

What states do not require liability insurance?

There are 3 states that differ from the rest as far as basic auto insurance coverage is concerned. These are New Hampshire, Mississippi, and Virginia. In New Hampshire the state gives the vehicle owner the personal responsibility and choice regarding car insurance. You can get it and the amount of coverage would also be up to you but you will have to pay for damages you cause to other people which include injuries, property damage and medical care. This is part of your responsibility as a driver-at-fault.

In Mississippi, you have a choice of posting a cash or bond with the local authorities instead of buying insurance. It’s a similar procedure to paying insurance except the bond or cash is paid upfront instead of in monthly payments. Also, it affords residents of Mississippi the option not to do business with insurance companies, if that is what they want.

In Virginia, vehicle owners have the choice to buy insurance with the local DMV or place a Surety Bond with the same office. If they would rather not do this, they will be required to get minimum insurance of 25,000 bodily insurance for one person/50,000 bodily insurance 2 or more persons/20,000 property damage from any local insurance company.

Can a person get liability insurance on a car they don own?

This is known as the “Frequent Borrower” listing which happens when a person borrows a car to use on a regular basis. The car owner can then list this person under his car insurance so he is covered by the policy. This is very common among couples and families but it has its downside such as higher premium if the listed person does not have a good driving history.

In cases where a borrowers buys liability insurance on a car he does not own or is not assigned to him as an office car, there is the chance that the insurance company may reject any claims made. When applying for car insurance, the basic assumption is that the applicant is the owner of the vehicle unless stated otherwise. If you are not the owner and you do not inform the insurance company, your application may be considered fraudulent containing false information. It will lead to the cancellation of the policy and non-approval of any claims you may file with them.

It is critical that you inform the insurance company if you are not the owner of the vehicle. They have their own protocol to follow for cases like these which is not standard with every insurance company.

Why would liability insurance be higher for Ford Explorer than a f150 pickup?

Car insurance is computed based on how much it would cost the insurance company to repair or replace the vehicle. In short, the estimated value of the car for the next 12 months is important and the higher this estimate is, the higher the premium charged to you will be.

The price of the new Ford Explorer is about $29,150 while the price of the Ford F-150 is approximately $23, 500 which means there is a big $5,000 difference. This is the main reason why the Ford Explorer comes with a higher premium.

In addition, the parts of the Explorer may cost more and the labor cost could be higher since it is a more expensive vehicle. Then, one has to consider the fact that a Ford Explorer may be more likely to be stolen than a Ford pick-up truck even if the pick-up truck is brand new and a Ford F-150.

One could also consider that in the past year, Ford Motors has been performing exceptionally well not just in Northern America but also in Asia. The demand for Ford vehicles globally is increasing which means it is managing to retain a high value even for older models. While this is great news for Ford, it is expected to be met with trepidation by insurance companies.

Can I be sued if I carry liability auto insurance?

Liability insurance protects you if you damage another person’ property with your car or driving. Part of the protection includes legal defense. Your insurance company should provide you with a lawyer whose fees the company will shoulder in case there is a law suit filed against you in relation to a car accident.

The usual case for being sued even with liability auto insurance is when your limit is low and the expenses of the other party are much higher. Should you lose the case and want to appeal the decision, the insurance company is no longer obliged to pay for legal representation. In most cases though, the lawyers will try to come to a settlement arrangement even before the case gets to court.

Also covered by the insurance company in the first instance of legal battle are the court fees. This is one of the reasons why most experts in insurance would not recommend getting the basic minimum liability coverage. Even with the legal assistance from the insurance company, there are other aspects to consider such as time and income loss and the high probability that your premium will be increased by the insurance company not to mention a note on your driving history.

When should you reduce car insurance to liability only?

Ideally, car insurance should not be reduced to liability coverage only but we don’t live in an ideal world and many are struggling with poor finances. Thus, the cases when you feel you can live comfortably with liability coverage only are:

• when you have the funds to cover unexpected car and medical expenses
• when you drive less often than you commute
• when you have fully paid off your auto loan
• when you are insuring a second car that you do not plan to use daily
• when you’re planning to sell the car within the next 12 months
• when your car is in excellent running condition, well-maintained and your driver’s record is impeccable

Instead of cutting back on liability insurance for a car you use daily, consider other budget cuts like extended warranties, credit card insurance, or cutting out some insurance coverage that you may not need. This means that it is not a case of full coverage or minimum coverage. You can customize your insurance policy so it fits your budget and insurance needs. There is a middle ground that you can work with. You just need to find an insurance company or agent willing to sit down and work out the perfect policy for you.

What does bodily injury liability insurance cover?

Bodily injury liability covers injuries of the driver and passengers in the other car sustained in a road accident where you are the other party at fault. The damages that are covered under bodily injury liability are direct costs like emergency medical treatment and indirect costs like succeeding medical treatment that may be necessary for full recovery, and loss of wages.

It does not cover your personal injuries or injuries of your passengers. This is an insurance coverage known as medical coverage. Another insurance that many decide to buy is the underinsured or uninsured motorist coverage because it addresses the problem of injuries sustained when not at fault.

If your bodily injury coverage is insufficient to cover the medical costs of the other party, and they decide to sue for more, your bodily injury liability will cover trial and legal fees. Even if the injured party is healed, they could still come after you for “pain and suffering.”

This insurance is critical because it’s hard to rule out other people who may want to take advantage of the situation. This isn’t to say that everyone who sues under bodily injury liability is questionable, but it has been known to happen.

What are the best liability policy limits?

The best liability policy limits would be the top amount an insurance company is willing to go with. It will most likely cover all situations where you as the driver cause an accident to happen which injures other people or damages property.

The bump on this type of coverage is that the premium would be very high especially if you live in an area where accidents happen regularly and/or your car is a brand new top-of-the-line model.

Another way to look at what would be the best liability policy would be to imagine not having to shell out anything out-of-pocket including a high deductible. Obviously, state minimums are not the best liability policies because they barely scratch the surface in most road accidents. Medical treatment alone is astronomical and increasing every year.

In addition, the best liability policy for you may not apply for another person. This is because you may be a lousy driver compared to someone else and so your driving history demands that you get higher coverage for property damage liability than PIP or uninsured motorist coverage. In a nutshell, the best liability policy would be one that fits your needs and driving habits to a tee.

liability insurance auto