Figuring the Extent of Your Auto Insurance Liability

Auto insurance liability is a type of auto insurance coverage and an important component of all auto insurance policies. It covers the legal costs that you may incur due to a car accident you were involved in. In other words, if the other driver sues you, liability insurance will help you pay the resulting bills. There are a number of factors that determine the extent of your auto insurance liability, and not all of them are up to you. However, they still leave you some room for flexibility - provided you know what to aim for.

Minimum and Maximum Auto Insurance Liability

While you get some choice when it comes to the value of your liability coverage, there are certain minimums and maximums that set the limits on how much (and how little) liability insurance you can get. The limits are based on three aspects of liability insurance coverage. They are:

  • Per person for bodily injury coverage - how much each individual person may be compensated for should he or she suffer any injuries

  • Per accident for bodily injury coverage - how much all of the people may be compensate for if they suffered injuries.
  • Per accident for property damage coverage - how much an individual person may be compensated for damage to his or her vehicle.

The minimum liability insurance limits are set by the states. The insurance providers cannot offer liability insurance that falls below those limits. The exact limits vary depending on the state in question. It should be noted that the minimum Per accident for bodily injury coverage limit is always twice the value of the per person for bodily injury coverage limit. If more than two people were injured in the accident, the first person who files the claim will get the full  value of per person for bodily injury coverage. The rest will be split between the remaining parties, and you will have to make up the difference between the value of per person limits and the amount of money they actually receive out of your own pocket.

The maximum liability insurance limits are set by the auto insurance companies themselves. They may vary depending on your location, type of vehicle you drive, your driving record and your age and health history. If you need more liability coverage than the maximum, you will have to it out of your own pocket.

Finding the Value of Your Liability Insurance

When it comes to choosing how much liability insurance coverage you need, you will have to strike a balance. Choose too little and you won't have enough money to take care of your legal needs. On the other hand, if you buy too much, the other person is more likely to sue you for more damages. The best way to figure out how much you'll need is to use your annual income as a measuring stick. If the liability insurance is worth more than your annual income, you can safely reject it and get something cheaper. Keep in mind that your savings don't have to be factored into your annual income.


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