You may be thinking about switching from full to liability coverage. If you're still paying off a car loan, liability coverage isn't sufficient. Even if your car is paid off, it may make more sense to keep full coverage if it still has fair value. Know what you're paying for in liability-only coverage, and then insure your auto to best protect your assets.
Bodily Injury Liability Coverage
Bodily injury coverage is the most common type of liability insurance. This coverage kicks in if your car is deemed responsible for causing an accident. However, it doesn't cover the driver, only people injured because of the driver's negligence. All states except New Hampshire require some level of bodily injury liability to protect the driver from claims due to the accident. These claims include medical expenses, lost wages, and even pain and suffering.
Property Damage Liability Coverage
Property damage liability coverage is typically bundled with bodily injury liability. It works pretty much the same way except it pays out for damage caused to property rather than people. Again, the coverage kicks in when the driver of the insured car is deemed at-fault for causing the accident. The coverage can be for another vehicle, property or items such as fences and trees damaged in the collision. Both types of insurance follow the car, regardless of who's driving.
Levels of Coverage
When you look at an insurance policy and access the liability coverage, you'll notice a set of three numbers separated by slashes. These indicate, in order, the maximum amount in thousands of dollars the policy pays out for bodily injury to one person, injury to all people in the accident, and property damage. For example, if you see 25/50/25, that means the policy covers up to $25,000 for one injured person to a total of $50,000 for all injured people and an additional $25,000 for property damage. Most states have minimum requirements of coverage.
Choosing Liability Coverage
Whether you have full or liability-only coverage, you'll need to choose your levels. If your car isn't worth much, the lowest liability coverage allowed might be sufficient. However, Bank Rate recommends keeping in mind your other assets when selecting coverage levels. If the driver of your car is deemed responsible for causing an accident, and the liability doesn't adequately cover expenses, the injured parties could sue. Yet increasing coverage only raises your premium a little. In short, look at your budget related to your assets, and select the most liability coverage you can afford.
Liability coverage protects you and your assets in case your car is at-fault in an accident. Seek additional info that's specific to your situation and select the coverage levels that best protect you.