February 9, 2012

Liability Insurance Limits And Your Auto Insurance Coverage Costs

It is no secret that auto insurance coverage has gone up in cost over the last few years. The reasons are varied and include a higher accident rate and more teens being on the road. There are also other factors that play into the high costs of auto insurance coverage. Since car insurance is a state mandated and state run program, the laws tend to vary. The minimum state requirements are also different depending on where one lives. In order to get cheap car insurance, many drivers opt to go for the bare minimum which usually includes liability coverage and the lowest amounts for the three main policy inclusions. It is vital to understand what liability auto insurance coverage covers and what costs are involved before determining if this is enough coverage for you.

Different State Laws

There are states that follow no fault laws in which the car insurance is liable for reimbursing their policyholders regardless of who was at fault in an accident. In these states, liability coverage may just be enough to get a cheap car insurance policy and not worry much about payments after an accident. In other states, however, tort law is the mandate for car insurance which means the injured party can sue the policyholder for damages in court. For people living in these states, liability alone may not be a good idea.

While liability is the state minimum requirement for most tort law states, it may not cover what you think. The costs for liability car insurance policies are the lowest among all insurance types. But there are three main policy inclusions that must be considered as well, including uninsured drivers and personal injury protection. Some people may elect to get the lowest coverage possible for all three policy inclusions which ultimately make the monthly premium low. However, this may make having an accident much more costly.

If the policyholder is taken to court and the damages and/or injuries exceed the amounts selected on their liability policy, the remaining balance must be paid by the policyholder. This can turn out to be an expensive risk that is unnecessary. On the other hand, not getting at least the state insurance minimum can result in license suspension (temporary). In addition, the state may then require the driver to carry a high risk policy for up to two years, sometimes longer. Those policies can be extremely expensive especially after a police stop or accident.

While getting basic liability coverage meets most state requirements, it is important to also increase the amounts on the other main policy inclusions. This way, the driver will be protected in case of a bad accident and owe less money.