Explain Auto Liability Insurance
Liability protection may be the most important auto insurance coverage since it can prevent the insured from experiencing financial insolvency because of an accident. In most states, liability insurance is a required coverage, and some states set minimum amounts of coverage that need to be carried.
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Need
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Without liability insurance, a driver would be held accountable for all injuries and damages he caused in an automobile accident. In many cases, damages could be several hundred thousand dollars. Without insurance protection, the driver would have to pay the costs out of pocket, which could result in financial ruin.
Bodily Injury
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Bodily injury liability provides coverage in situations where a driver was deemed to have caused injury to or the death of another during or because of a covered auto accident. It will pay the medical expenses and other associated costs such as lost income. It will also provide protection in the event the injured party attempts to seek damages through a lawsuit.
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Property Damage
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Property damage coverage will provide reimbursement to another party in the event that an insured's vehicle caused damage to her property. In most cases, this will be another vehicle, but it could also include damage to objects such as fences, houses or lawn ornaments. As with bodily injury, this coverage will provide protection the event of a lawsuit.
Types
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There are two types of liability insurance: combined single limit and split limits. With a combined single limit, the property damage and bodily injury are lumped together, and there is one maximum limit to cover both situations. With split limits, the property damage and bodily injury coverage are separated.
Recommended Limits
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If inadequate amounts of liability insurance are carried, the driver could be held liable for any excess amount. The Insurance Information Institute recommends that the minimum an insured should carry are limits of $100,000 per person, and $300,000 per occurrence. If a person owns a large amount of assets, $500,000 worth of coverage should be considered.
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