I am amazed at how many people select their level of liability auto insurance coverage without even knowing what coverage they're buying. It only takes a few minutes to understand how liability coverage works, and it is very important coverage to have. You need to understand liability coverage in order to be able to get your coverage at the level you need it to be.
There are two ways for auto insurance companies based their liability coverage on: split limits and combined single limits. The vast majority of you have your liability coverage based on split limits, so we'll start with that.
Split limits are usually represented in the following way:
These three components tell you how much your policy will pay out if you are at fault and cause an accident. They're usually represented in terms of thousand of dollars (E.G. 100 = $100,000).
Part A: Represents how much your auto insurance company will pay for injuries you caused to a single person. So for example, if you have 100/300/100 coverage, and you caused a serious accident, it will pay the other driver or one of its passengers up to $100,000 per person.
Part B: Represents the same thing as far as covering you if you cause bodily injury to another driver or passenger. The difference is that part B is the total it will pay for all of the injuries you caused in one accident.
Part C: Is what your auto insurance policy will pay out for any property damage that you caused.
It's as simple as that! That's how split limits work on the liability part of auto insurance.
Example: 100/300/50 ....
100 is part A, 300 is part B, 50 is part C
So for any policy that has 100/300/50 in liability coverage, $100,000 is the most that any one person can receive for medical injuries you caused. $300,000 is the most in total it will pay for injuries to multiple people. And $50,000 is the most the policy will pay for property damage you caused.
Combined Single Limits
A small percentage of you may have combined single limits instead of seeing three different numbers. This represents the total amount your policy will pay out for liability injuries and property damage. There's no limit to how much it would pay anyone person for injuries, there is no limit on how much it will pay out for property damage either. The only limit is how much your combined single limit will pay in total for one accident.
So for example if you have a policy with combined single limit of 500,000, that's the most your policy will pay out for injuries that you caused plus property damage your caused. It doesn't matter whether the damages are from bodily injury or property damage. Once the totals approach that number, that's the most your policy will pay out.
Quick word on state minimum liability auto insurance coverage
Every state assigns a minimum level of liability coverage that drivers are required by law to carry in order to drive legally. A lot of drivers tend to settle for the state minimum amount of coverage. This is a HUGE MISTAKE! If you cause a serious accident, state minimum coverage is far from adequate to cover the costs of personal injury and property damage. YOU could be on the hook for the rest of the charges your liability coverage doesn't pay. Always check to see how much more higher levels would be. In many cases, you will be surprised how little in cost that higher levels of coverage run.
The Connection between Liability and Uninsured/Under-insured Motorist coverage.
Another very important part of your auto insurance coverage is uninsured motorist coverage... You can only select uninsured motorist coverage at a level equal to or less than what you're carrying for liability.... So if you go skimpy on liability coverage, you will have to go skimpy on uninsured motorist coverage as well.
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Dan Lyles is an Independent Insurance Agent serving Ohio, Indiana, Michigan, Pennsylvania, Virginia and West Virginia..