Auto Liability Insurance Policy
An auto liability insurance policy, or what is also referred to as a liability only policy, actually has several parts of coverage. A liability auto policy refers to a policy that does not include comprehensive, collision, towing and rental coverage. This means the liability policy does not cover damage to your car. There are, however, still several options to consider with the liability only auto policy.
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Liability
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Liability insurance pays for injuries and property damage that happen because of your negligent actions. When an accident is determined to be your fault or a result of your actions, then your liability insurance pays for the damages. Liability insurance is broken into three numbers that look like 25/50/10. Liability is listed in thousands, so in this example, the first number is $25,000. The first number is for medical damages for a single person, the second number is for medical payments for everyone involved in a single accident, and the last number represents the limit for property damage. These are limits, meaning it is the most the insurance company will pay, and you are responsible for anything over that amount. This is why it is recommended to carry higher liability limits than what the states require. If your liability is too low, then you are exposed to high value lawsuits if you cause an accident.
Medical and Personal Injury Protection
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What state you live in determines if you have medical insurance or personal injury protection (PIP) on your car insurance. They both pay for medical bills for you and passengers in your car in the event of an accident, but medical insurance is for at-fault states and PIP is for no-fault states. No-fault insurance is misleading; fault is still determined in an accident and liability is paid by the at-fault driver, but medical costs are first paid through your own policy. This is meant to reduce insurance fraud.
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Uninsured
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Uninsured insurance pays for you and your passengers' medical bills if you are in an accident and the other driver does not have insurance. Uninsured insurance has limits like liability insurance, and is broken into two numbers, like 25/50. This is again read in thousands, and represents the limit an insurance company will pay. There is no third number because uninsured insurance does not pay for damage to your vehicle. If you have liability only auto insurance, and you get in an accident with someone with no insurance or in a hit-and-run accident, then you have no coverage at all for damage to your vehicle. This is a common misconception of uninsured coverage.
Under-insured
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Under-insured coverage pays if you are in an accident and the other driver carries very low limits of liability. The other driver might only have state minimum coverage, but your medical bills can cost more. You are able to sue the other driver, but it is a time consuming and sometimes fruitless process. By carrying high under-insured limits you take chance out of the equation and are protecting yourself from this potential situation.
Cost
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By carrying liability only insurance you can cut the cost of your insurance drastically, but you risk being in an accident and having no coverage to pay for damages to your car. The cost of liability auto insurance is based primarily on you as a driver. The insurance company reviews your driving history and credit history to determine a price. Some companies also rate the liability of vehicles. Safer cars cost less than cars that are more likely to be in an accident or cause high levels of damage.
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References
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