On the list of things the average person knows a lot about – their field of study, their city’s best restaurants, or their family’s pet peeves – auto insurance probably ranks pretty low.
Most people know they want to be protected if they get in an accident, but they’re not sure how their insurance works, or how much coverage they actually need.
Liability insurance is one area that many people have questions about. In this article, we’ll discuss two major parts of your auto liability insurance: bodily injury liability and property damage liability.
You’ll learn what these coverages are, how they work, and how to make sure you have enough coverage to protect you from financial loss.
What Are Bodily Injury Liability Insurance and Property Damage Liability Insurance?
Bodily injury liability and property damage liability help you pay for injuries and property damage you cause to another person in a covered, at-fault accident.
Here’s a breakdown of these two coverages:
Bodily Injury Liability
- Helps you pay for another person’s injury-related expenses, including:
- Medical expenses (e.g., emergency care or hospital bills)
- Lost wages
- Pain and suffering compensation
- Funeral expenses
- Can also pay your legal fees if you’re sued
- Applies to other drivers, pedestrians, and non-family members in your car (provided they are not listed on your policy)
Property Damage Liability
- Helps you pay for damage you cause to another person’s vehicle, or other property, in an accident
- Applies to damage such as:
- Damage to someone’s car in a collision
- Damage to someone’s property (e.g., a mailbox or fence)
- Damage to city property and any resulting damage (e.g., hitting a fire hydrant and causing water damage to nearby property)
What Isn’t Covered by Bodily Injury Liability and Property Damage Liability Insurance?
It’s important to know that the liability insurance you carry does not cover your own losses.
This means that your bodily injury coverage won’t help you pay for your own medical expenses or other costs. Those costs would be covered other types of insurance, such as your own health insurance.
Likewise, your property damage insurance won’t cover the repair or replacement costs for your property – that’s where your collision and comprehensive insurance come in.
How Do Bodily Injury and Property Damage Limits Work?
Your liability insurance limits tell you the maximum amount your insurance will pay out in a covered accident. You can think of this as how much coverage you have.
In your policy, these limits appear as a list of numbers separated by slashes – for example, 100/300/100. These numbers represent dollar amounts. In this case, the limits are $100,000/$300,000/$100,000.
The first two numbers are your per person and per accident bodily injury limits, respectively. The third number is your property damage limit.
Per Person Bodily Injury Limit
Your per person limit tells you the maximum amount your insurance will pay per person in an at-fault accident, up to your per accident limit.
Say you cause an accident that injures another driver and their passenger. The driver has injury-related expenses of $80,000, and the passenger has expenses of $70,000.
Your per person coverage limit of $100,000 applies to each of them individually. The driver’s $80,000 loss is lower than your limit, as is the passenger’s $70,000 loss.
And because the total damage ($150,000) is less than your per accident limit of $300,000, your insurance will cover the cost of this accident and you won’t have to pay anything out of pocket.
Per Accident Bodily Injury Limit
Your per accident limit tells you the maximum amount your insurance will pay out per accident, regardless of how many people are involved.
Say you hit a car with four people in it. Three people sustain injury-related damages of $100,000, and the fourth person sustains $10,000 in damages.
Even though each person’s expenses are lower or equal to your per person limit, you would not be fully covered for this accident because the total amount of damages ($310,000) is higher than your per accident limit of $300,000.
Therefore, you’d be responsible for paying the $10,000 difference out of pocket.
Property Damage Limit
Your property damage limit tells you the maximum amount your insurance will pay for property damage per accident.
Say you hit another car and cause $90,000 worth of damage to the other person’s car. Your property damage limit is $100,000, so your insurance would cover the repair costs.
If you caused another accident a week later, your coverage would remain the same: up to $100,000 for that accident.
Now, say you hit a more expensive car and caused $115,000 in damage. Because the costs exceed your limit, you’d have to pay the $15,000 out of pocket.
How Much Auto Liability Coverage Do I Need?
Most states require drivers to carry a set minimum amount of liability coverage. In California, the minimum is 15/30/5.
That’s $15,000 for bodily injury per person, $30,000 for bodily injury per accident, and $5,000 for property damage coverage.
You may be tempted to stick to the state minimum to keep your premium as low as possible. However, increasing your limits doesn’t always result in a drastically higher premium.
In many situations, doubling your liability coverage will only add a few extra dollars per month to your bill.
Think of it this way. Would you rather:
A. Pay $15 more per month for your premium
B. Pay $50,000 out of pocket due to an at-fault accident
Odds are, you’re more willing to pay $15 more now to avoid paying a five-figure amount later!
In general, the lower your liability limits are, the more exposed you are to financial risk. This is especially true in California due to the high risk of car accidents and other auto claims.
And your existing assets aren’t the only things at risk. In California, you can be ordered to pay damages out of your future earnings if you can’t pay now. That’s even more reason to consider higher limits.
To determine how much coverage you need, consider your assets, income, and risk tolerance.
Ask yourself how much you could lose if you were in a serious at-fault accident today. Are you financially prepared to pay out of pocket for someone else’s hospital or auto shop bills? How much risk are you comfortable living with when it comes to potential losses?
For more guidance, use our intuitive Liability Calculator to help you determine a good coverage level for you.
With the right coverage, your bodily injury liability and property damage liability insurance can protect you from debilitating financial losses due to an auto claim.
Evaluating your coverage needs with a professional is the first step to making smart insurance decisions.
JSG Insurance Services offers complimentary policy reviews, including side-by-side comparisons of your current policies along with our recommendations. We’ll explore your options and recommend the coverage that works best for you.
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