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Liability Car Insurance Coverage

Liability coverage is arguably the most important coverage on your auto insurance policy. For one, liability coverage is mandated by law in every state. More importantly, liability coverage insulates your finances and assets from costly accident-related lawsuits. If another party with whom you are in an accident sues you for damages, a large lawsuit judgment could ruin you financially without adequate liability coverage. Read on to find out how the liability portion of your car insurance policy works, why you need the protection, and how much coverage you should buy.

State Requirements

States determine the minimum amount of liability coverage drivers must carry, so the amount of coverage you need to drive legally will depend on where you live. To find out your state's minimum car insurance laws, you'll need to contact the department of insurance for your state, the department of motor vehicles in your area, or an insurance agent or broker. Depending on your state, failing to carry the minimum required amount of auto liability coverage could result in hefty fines, tickets, and/or the revocation of your driver's license.

Bodily Injury and Property Damage

The liability portion of your car insurance policy is broken down into two components: bodily injury liability and property damage liability. The first coverage, bodily injury, will pay for the injuries and deaths of other parties involved in an accident in which you are at fault. The second coverage, property damage, will pay for the damage your car does to others' property, such as homes, vehicles, etc. Both coverages will pay for your attorney fees in the event of a lawsuit. Some insurers even provide legal counsel to policyholders as part of their services.

The amount of bodily injury and property damage required by your state is usually expressed in shorthand with three numbers. For example, Utah's requirements are 25/50/15, which means drivers must carry $25,000 of individual bodily injury coverage, $50,000 of bodily injury per accident, and $15,000 of property damage coverage.

Coverage That Accommodates Your Needs

Remember that your state's requirement is the bare minimum amount of coverage; regard it only as a starting-off point for building your policy. The vast majority of policyholders should carry much more than the legal minimum in order to adequately protect their assets, such as homes, investments, savings, and so on. In fact, some financial advisors recommend that no driver carry less than $300,000-$500,000 in liability coverage. The only exception to this rule is if you have little or no assets to protect. Discuss your situation with your insurance agent, broker, or financial advisor to find out how much liability coverage will suit your individual needs.

What do You Need to Insure?

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