Liability insurance is a form of automobile insurance coverage that is designed to protect the insured if they are deemed at-fault for an accident.
There are generally two components that make up your liability coverage, each with separate coverage limits:
Bodily injury liability coverage: This coverage is designed to apply towards the medical expenses of the other party in an accident in which you’re deemed to be at fault. In some scenarios, this portion may also cover items such as lost wages and legal fees.
Property Damage: This coverage is designed to apply towards any property damages that you may have caused in the accident. It primarily covers vehicle repair or replacement costs, but can also apply to other damaged items such as lamp posts, phone poles, fences, structures, etc.
Example) You’re driving home from work and happen to lose focus for a brief minute. When the vehicle in front of you stops, you don’t, and strike their vehicle from behind. In this scenario, your automobile liability insurance coverage would pay out to fix the other driver’s vehicle, as well as to cover any injuries that they may have suffered as a result of the collision.
While most insurers specify a specific limit for each portion of your auto liability coverage, there is another product called a “Combined Single Limit” liability policy that limits the coverage for all components for a liability insurance claim to a single amount. This policy essentially pools the bodily injury and property damage amounts into one single limit of coverage.
Example) Assume an at-fault driver has an auto liability policy that covers $100k per person/$300k per accident for bodily injury and $50k for property damage. If he totals out another party’s $80,000 vehicle, his insurance will pay out up to the $50,000 property damage limit, but the excess will be his responsibility. Assume that same driver has a $350,000 Combined Single Limit policy. In that scenario, the entire $80,000 would be covered by the policy.
Important Note: Insurance laws vary by state. Check with your local insurance professional regarding the specific rules and regulations of your area.