Insurance 101: Liability Coverage

Posted July 26, 2016 Insurance 101

Do you think you have a sound understanding of the coverages found within your auto insurance policy? Not knowing what these coverages and the limits bound to them mean could potentially lead to major out-of-pocket expenses, or worse. GREAT NEWS, we’re here to help!

Over the next few weeks, we will examine and explain different aspects of your auto insurance policy to help you feel more comfortable and more confident the next time you speak with your (our) insurance agent.

LIABILITY COVERAGE

Liability Coverage helps pay for your legal responsibility in the event of bodily injury or property damages to others. Carriers can provide this coverage in two different ways: a split limit of liability or a combined single limit.

A split limit of liability provides different limits for property damage and bodily injury. For most policies, the bodily injury limit is usually also split between a per person limit and a per accident limit.

Example: Let’s say that your declarations page in your insurance policy states:

$250,000/$500,000/$100,000

Not sure what these values mean? Let us explain. The $250,000 amount refers to per person, $500,000 per accident, and $100,000 for property damage. In other words, the most your insurance company will pay out for one person’s injuries is $250,000 (per person), if multiple people are injured $500,000 (per accident), and any property damage $100,000.

On the other hand, a combined single limit provides one limit of coverage for both bodily injury and property damage.

Example: Your declarations page states:

$500,000 single limit liability

The most the carrier will pay out for all liability claims per accident, regardless of bodily injury or property damage, is $500,000.

The state of Pennsylvania requires minimum limits of $15,000 per person, $30,000 per accident and $5,000 for property damage, or $35,000 combined single limit. While at first glance you may think the minimum limits are more than enough to protect you after an accident, just remember that you are responsible for any costs exceeding those limits.

For example, you agree to purchase the state minimum split limit liability coverages ($15,000 per person, $30,000 per accident and $5,000 for property damage). After damaging another vehicle in an accident, you are informed that the total cost to repair the other vehicle is $10,000 ($5,000 over the limit for property damage), and that the driver of the other vehicle files suit against you for the outstanding $5,000…

For this reason, is it very important to review your current liability coverage policy with an insurance agent to determine appropriate limits in the event of an accident.

Not sure of the name of your current insurance agent? Did your current agent explain these policies before binding coverage? Do you feel comfortable with or know of your current policy limits?

If you answered “No” to any of these questions, it may be time to speak with an expert who is here for you. Contact our Expert Mike Moore by calling (412) 281-1842 ext. 233 or emailing [email protected].