What is Liability Only Insurance Coverage?

Feb 1, 2021 | Personal Insurance

Auto insurance policies have many types of coverage. It isn’t bizarre for you to wonder about the advantages and disadvantages of each type and one of them is Liability Only Insurance Coverage.

Most of the time, insurance companies introduce full coverage insurance to their clients or in bundles. Although, you can choose which plan and coverage you want to get covered with.

In deciding which coverage to buy, you may be wondering “What is Liability Only Insurance Coverage?” It is best to ask your insurer about this coverage to find out the answer. Of course, it is essential to know more about the details. By being knowledgeable of the costs, the things that do get covered, and the ones that don’t, you can make the decision wisely. 

As an independent insurance agency here in Denver, Colorado, we come up to explain the details thoroughly about liability coverage.  

Is Auto Liability Insurance A Requirement?

What is Liability Insurance Coverage? As we all know, from the term itself, Liability Insurance Coverage covers the damages or injuries you incurred on someone and his property. In most states in the US, all drivers are required to have active liability insurance. Driving without one can cause serious consequences. It is a policy that provides insurance versus claims regarding damages and injuries made to other parties. It covers the costs for the damages that the insured person is accountable for.

For instance, your vehicle collided with another. The cars of both you and another driver got damaged from the impact. Another issue is that the other party also received injuries. After the investigation, they found out that you are liable for the accident. Your liability insurance will compensate for the medical expenses and damage repairs that the other driver will have to pay.

By the term “liability only” insurance, it means that you are getting covered by the minimum insurance coverage required by law. Other situations like getting your car damaged by hail or vandalism have other types of coverage to handle them. The question is, what does liability only insurance cover?

Liability Insurance Covers The Costs That The Other Party Will Spend

There are certain conditions that your liability insurance must meet to kick in. If the other party can’t prove that you are at fault for the accident, you won’t be liable. Of course, if you are known to be responsible for it, your liability insurance will come into the scene.

There are limits to the amount that your insurer will payout. Depending on the coverage limit that you choose, the amount that your insurer will cover varies. There are minimum coverage limits that each state makes as a requirement. You can still opt to buy additional coverage though.

Two Types Of Coverage Make Liability Insurance

It may be unknown to some people that liability insurance consists of two types of coverage. As mentioned above, liability pays out for the damages that you are responsible for. Both humans and property need compensation. The said two types of coverage are exactly for that reason. Liability insurance includes reimbursement for bodily injuries and property damages.

  • Bodily injuries. As the term implies, bodily injuries liability insurance covers the bills spent on medical concerns of the other party. Take note that these medical concerns are just for the injuries sustained because of the accident. If the other party decides to file a lawsuit against you, you are still covered for the legal fees. However, it depends on the coverage limit you chose. If it exceeds the limit, you might have to spend money on settling legal fees.
  • Property damage. Damages made to the properties involved in the accident gets covered as well. These include the damages that the vehicles got and the surrounding properties that got wrecked. If there are fences, mailboxes, phone poles, and other properties that got ruined, your insurance will also cover it.

Coverage Limits

Your liability insurance is not unlimited. Naturally, there are limitations, both in the conditions and on the amount of money. Ask your insurer about the details that you need to know regarding those limits.

In setting a coverage limit, you must make sure that the amount that you will set is enough. Choose an amount that will make you set your mind at peace. Having enough to cover the medical expenses and the other party’s car repairs is important. There are three coverage limits that you may see in your insurance policy. 

  • Property damage liability limit. This is the maximum amount that your insurer will pay for the property damages made.
  • Bodily injury liability limit per person. For each person injured, this amount is the maximum payout that your insurer will cover.
  • Bodily injury liability limit per accident. Take note that this is the total amount for all the medical payments in every accident, which is different from the limit per person.

What Does Liability Insurance Not Cover?

There are boundaries on the things that liability insurance covers. You must keep in mind that it only pays for the damages made to other people, and not on yours. Simply put, in an accident where you are at-fault, you will pay for the expenses that you will need for yourself.

For instance, you hit the rear of another car due to heavy traffic. Your bumper got damaged, as well as the rear part of the other driver’s car. Your liability will pay for the other party’s vehicle, but will not pay for the repair costs of yours.

Of course, you don’t need to worry. As long as you have other coverages in your auto insurance policy, it is quite easy to solve. Problems involving damages inflicted by yourself and by other situations can also get covered, though in other types of coverage.

Remember that the following types of coverage are optional. They are the typical ones included in full coverage insurance. These are additional types that you may avail of. These will help you deal with certain kinds of situations.

Collision Damages

Talking about a collision, if your vehicle gets impaired in an accident, your liability insurance will not cover your vehicle. However, if you have collision coverage, then you have one less problem. Remember that collision coverage only pays for your vehicle, and nothing else.

For instance, you got into a collision with another driver, and the other party is at fault. His property damage liability insurance will pay for the repairs. In some cases where the other driver’s property damage liability is insufficient, your collision coverage will step in.

Other Types Of Damages

Your liability insurance will not pay for damages made to your car by hail, floods, and the like. Comprehensive coverage deals exactly with that problem. This gives payout for the repair or replacement costs if your car is damaged by natural disasters, or if it is ruined by man.

For example, your car is written with vandals and the windows are broken. Your liability insurance will not recompense you. However, if you are covered by comprehensive coverage and you filed a claim to your insurer, they will reimburse you. If it is stolen, they may also give you the replacement cost of the vehicle.

Your Own Medical Payments 

Being covered by medical payments coverage is helpful in paying for the medical expenses of yours and your passengers’. Whoever is at fault isn’t important, it will payout. However, keep in mind that this may not be available in all states.

In your liability insurance, if you are at fault, the insurance provider will only pay for the other party’s medical bills. All the expenses that you will make for your injuries are not covered. Though if you are covered by medical payments coverage, you will have your expenses paid for by your insurer.

How Much Liability Insurance Should You Buy?

Apart from the minimum amount that is set by your state, there is no fixed amount that you can buy. Of course, the more, the better. Raising the limits of your policy is useful, especially if you get involved in an accident where many people are injured.

Here’s a real-life situation. You are driving and you received a text message. You picked the phone and you got distracted. Your vehicle is nearing an intersection. However, when you finally pay attention, it is already too late for you to step on the brake. It resulted in an accident where five people, excluding you, are injured.

Suppose that the amount of money that each person needs for medical expenses is $40,000. There are five people injured. The expenses would amount to $200,000. The bodily injury liability per accident limit that you set is only $150000. You may notice that the total amount of the medical expenses that you will pay is larger than your set limit. You might have to pay the excess with your own money.

Do You Need To Get Fully Covered?

As mentioned above, being fully covered means availing of other types of coverage such as collision, comprehensive, and medical payments together with your liability insurance. Though the most basic coverage that you need to have is liability coverage, there are other options. Now, the question is, why not get fully covered?

Contrary to expectations, being fully covered doesn’t mean that you have got a better deal. Yes, maybe in some areas, but not in all situations. In answering this question, you need to consider many factors. 

Weighing the pros and cons of getting fully covered is useful in making the decision. Anyway, in getting insured, you don’t lose that much. It just comes to whether it is still useful for you or it is just another burden.

Factors That You May Consider In Upgrading

If all you have is liability insurance, you might have the intention of upgrading to full coverage. You might be hesitant about whether you should do the action. In order to know what action is better to do, knowing the factors that you may consider before getting full coverage makes sense.

By doing so, you will be aware of the right option that you can choose. Grasping the advantages and disadvantages of the action will be easier after. You may inquire from your insurer about the things that you need to know. Remember that the decision is yours, so weigh it properly.

The Age Of The Car And Its Replacement Cost

As time goes by, properties gradually lose value. That statement is applicable to vehicles. The value of your car continues to depreciate year after year. It is an important thing to consider because you might be losing money. 

For example, your car is worth $3000 to replace. However, you are paying for coverage that is worth $7000. Calculating the difference, it seems apparent that what you are receiving is less than what you are paying for.

Location

Location is a crucial factor in your insurance premiums. The more dangerous your area is, the higher the premiums you will have to pay. You need to include this in your reasons as to why you are going to upgrade. Why is that?

It has a direct effect on your safety. You may notice that in places where there are many vehicles present, the more accidents that happen. If for instance, you get into frequent collisions, then considering upgrading is a must.

Another reason why location is crucial is because of the other damages that you may encounter. Natural phenomena like floods, hail, hurricanes, and falling debris are dangers to the safety of your car. Places with high cases of theft and vandalism add to the possible dangers that you need to take into account.

In Denver, Colorado, some reasons why the rates are high are because of the increasing population, and hail. Colorado is among the top where hail damage claims are frequently made. More and more people are moving in, resulting in heavier traffic. Naturally, cases of accidents also rise.

Budget

Let’s face it. Talks about money are important. It is okay to stick with your liability only insurance if you are quite tight on your budget. However, it is not bad to get insured in other types of coverage if you have the money. After all, we are talking about your life and your car. 

If you are unaware, there are deductibles in full coverage insurance. Deductibles, as the word implies, are the set amount of money that is subtracted from the payout of your insurer. It is the money that you need to pay before your insurance applies. Having a deductible reduces your insurance rates. If your deductible is high, your premiums will be low.

Liability Only Insurance vs. Full Coverage

Now that you are aware of the details that you need to know, let us do a comparison. There are pros and cons to both types of coverage. The question is “Which one is better?”

Although it may be a matter of perception, we will still be able to tell which of the two is a better option. Only by knowing what benefits, we can get, and what things we will lose, can we make the judgment. Below are some of its advantages and disadvantages.

Benefits Of Liability Insurance

Though liability insurance is the minimum coverage that you need to have, there are positive points in that. It may seem simple, but it is practical. If you are a careful driver, it can save you quite a lot of money.

  • Cheap. Since it is the bare minimum, with no other additions, the price is low. You can make the best out of it if you are driving an old car. After all, old cars have low value, making your insurance rates cheaper.
  • Less expense.  If you are looking to save money, opting for liability only is clearly the best thing to do. Especially if you are driving an old car model, you can save the money for repairs instead. Aside from that, maybe you can save enough to buy a new car at a later date.

Downsides Of Liability Only

Although it can be quite advantageous for you, it has its own downsides. It can make your own practice in driving a crucial factor. Depending on the situation, it can also possibly act as a restriction.

  • You can be left vulnerable in terms of money. For instance, you got into an accident. The impact was quite large. Your liability insurance paid for the property damages and the medical expenses of the other party. However, to repair or replace your car, you need to take the money out of your pockets.
  • You can’t finance a car. If you want to drive a car through an auto loan, it may not suffice that you only have liability insurance. Most companies require the drivers to be covered by collision and comprehensive coverage to protect their interest. The reason is that they are afraid that you won’t repair the car. 

Advantages Of Getting Fully Covered

Undoubtedly, full coverage insurance has its advantages. After all, you are getting covered in all areas. It is the type of insurance that you can describe as almost an all-rounder. Though it doesn’t mean that you are protected all the time, it lessens the worry that you would have to face. 

It is a good investment, especially if you have the means. Anyway, though it may not be practical for some people, your money has a good place to go at some point. These benefits that you can get might be the relief that you are looking for.

Your Assets Are Protected

If you buy full coverage, as mentioned above, your insurer will help repair or replace your car. Being involved in an accident where you are injured can halt your income. This may result in you suffering from the difficulty of paying the damages. That is why, if you are covered, you don’t have to worry much about that.

Paying for medical expenses is also costly. Imagine if you have to pay for everything out-of-pocket. Not only will your head hurt, but your heart will also feel pain from losing so much money. With full coverage insurance, you won’t have the problem of doing that.

You Can Be Worry-Free

The best benefit that you can get is peace. You will be able to rest at night not worrying about where to get the money to repair your car. Aside from that, common occurrences like falling tree limbs, vandalism, and hail damage will make you worry no more. With full coverage, all you have to worry about is how to pay your premium.

Disadvantages Of Full Coverage Insurance

If there are advantages, there are downsides to it as well. The effects vary from person to person. Maybe someone finds it disadvantageous for him, but another one views it positively. Nevertheless, there are a few disadvantages of full coverage insurance that are applicable to many.

Price

As the coverage is larger than liability insurance, which is the minimum, the price is higher. Although finding cheap auto insurance is possible, it is inevitable that it is more costly than liability only. If your budget can’t afford it, then maybe you have to work harder.

Paying the deductible

If you might not be informed, full coverage insurance needs you to pay your deductible first before it takes effect. Take note that the deductible that you will pay would have to come out of your pocket. Aside from your premium, you will also think about deductibles.

Final Say

It is unquestionable that we have different situations. Someone has a large stash of money, and another one has enough. Full coverage or liability-only, what matters most is that you are insured. Whichever it is, you will gain some, and you will lose some.  

In talking about which one to get, think about what suits you the most. Pick the one that fits your situation and lifestyle. That is the way you can make the decision aligned with your circumstances. You can balance your budget without thinking that it is a burden.

When the time comes, you will thank yourself for investing in insurance. After all, we don’t know what runs in the mind of fate. In case you get into an accident, your investment will come in handy. After you experience one, you will be able to learn which coverage is better for you.

We Can Help You With That!

Give us a call if you have questions about your insurance needs and we’ll gladly assist you. Let us help you learn the details about better options for your car insurance. Book an appointment with us today!