2 Scenarios Liability Car Insurance Covers (and 2 It Doesn't)

As a driver, it’s your responsibility to purchase liability car insurance to protect yourself in the event you get into an accident. In Florida, drivers are required to purchase $10,000 in liability insurance as well as $10,000 in personal injury protection (PIP) insurance.

Our Addition Financial members sometimes ask us about auto insurance, specifically what it covers and what it does not. We reached out to some insurance experts for advice. Here are two scenarios that are covered by liability car insurance and two that aren’t.

What Liability Car Insurance Covers

Let’s start by talking about the protection that’s afforded by liability car insurance. As its name suggests, liability car insurance protects you if you are at fault in a motor vehicle accident. In most states, it is illegal not to carry liability insurance on your car. Here are two scenarios that are covered by auto liability insurance coverage.

Bodily Injury to Another Party

The first thing that liability insurance covers is any bodily injury sustained by another party. Alex Killingsworth, a consultant with Superior Honda, told us:

"[Liability car insurance] covers a dollar amount of bodily injury... for the other driver when you are at fault. If you injure someone, an average bodily injury claim settles for around $25,000, making the risk far outside of most people’s budget."

Florida requires all drivers to carry $10,000 in bodily injury liability insurance, but you can see from the above figures that the bodily injury liability coverage isn’t enough to cover the average claim. It’s for that reason that our experts recommend setting your coverage limits at $250,000 per person and $500,000 per accident. That way, even if you are in a catastrophic car accident, you won’t need to pay out of pocket for the other driver’s medical expenses.

We should note here that auto liability coverage will take care of injuries of passengers in your car as well as in any other vehicles involved in the accident. Passengers who have medical insurance will provide information about injuries to all insurance carriers and they will work out who is responsible to pay in a process known as subrogation.

Property Damage for the Other Driver

The next category of insurance coverage provided by your auto liability insurance protects you from paying for damage inflicted on the other driver’s vehicle or personal property as a result of the accident. 

Jaime Arias, who is a licensed insurance agent with Dynamic Insurance Solutions, told us this about property damage liability coverage:

"Liability car insurance covers payments to others in the event the owner of the policy is responsible for an accident. It covers property damage caused by the policy owner."

If you are at fault in an accident that damages another party’s car, or any personal belongings inside the car, your insurance company will cover the repair or replacement of that property up to the specified auto insurance policy limits.

What Liability Car Insurance Does Not Cover

Now, it’s time to talk about what liability car insurance does not cover. There is more than one type of car insurance, and here we are focused only on liability coverage.

Damage to Your Car

You know that liability insurance will cover damages to the other driver’s vehicle or property when you are at fault in an accident. What it will not cover is damage to your car. If your car is scratched, dented or totaled in an accident that you caused, you will not receive payments from your liability insurance.

Of course, this doesn’t mean you’ll need to pay out of pocket. Collision insurance will cover damage to your vehicle. You should have both collision and liability insurance to protect you in the event of an accident.

We should note here that if you’re not at fault, the other driver’s liability coverage will kick in and provide you with compensation for the damage done to your vehicle. 

Injuries That You Sustain

Just as liability car insurance won’t pay for damage to your car if you are at fault, it also won’t pay for any injuries that you sustain as an at-fault driver. 

In Florida, all drivers are required to carry $10,000 in Personal Injury Protection (PIP) in addition to liability insurance. PIP coverage will pay for any injuries you sustain in an accident, regardless of who was at fault. Expenses such as ambulance fees, emergency room charges and follow-up care can add up quickly even if your injuries are minor.

If you have medical insurance, you can submit a claim to that carrier to pay for your injuries. In the event you’re in an accident where you’re not at fault, the other driver’s liability insurance carrier will coordinate with your health insurance carrier to determine who will pay for your claims.

What Are the Risks of Not Having Liability Car Insurance?

There are some significant risks to not having liability coverage. Most importantly, it is illegal not to have liability insurance as a driver in every state except New Hampshire and Virginia. Both states have other requirements – and even when liability insurance is not required, it is a risk not to have it.

According to Brad Cummins, the owner of Insurance Geek:

"Without coverage, you'll have to reach into your own pockets to cover any damage caused by driving including your own vehicle repairs and damage to anybody else's property."

We would add here that the financial responsibilities might also extend to being liable for medical expenses for any injuries you caused. If you are legally at fault for the accident, you will be forced to pay all expenses caused by your actions. As noted above, the average cost of bodily injury settlements is $25,000.

Laura Adams, MBA, is an Auto Insurance Expert at AutoInsurance.org. She told us:

"The penalties [for not carrying liability insurance] vary by state but include significant fines, license suspension, having your car impounded or serving jail time."

Brad Cummins mentioned the specific penalties in Florida:

"While Florida doesn't class driving without insurance as an offense punishable by jail time they do issue $150 fines and suspend licenses and registrations for up to three years."

As a financial institution, we should mention that driving without liability insurance can cause significant financial hardship that can take years to recover from. If you’re at fault and on the hook for thousands of dollars in car repairs and medical bills, it can impact your ability to buy a house or save for retirement. You might not love the idea of paying for car insurance, but it’s a necessary thing to protect yourself in the event that you are at fault in an accident.

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How Much Car Liability Insurance Should You Have?

Now that you know what liability car insurance does and doesn’t cover – and why it’s never a good idea to be without it – let’s talk about how much coverage you should buy. In Florida, the requirement is for $10,000 of Personal Injury Protection (PIP) insurance and $10,000 each in bodily injury and property liability insurance, but our experts all agree that the minimum coverage limit far too low.

The limits that were most frequently mentioned by our experts were as follows:

  • $250,000 in bodily injury liability per person
  • $500,000 in bodily injury liability per event
  • $100,000 in personal property liability

The premiums will be higher for this type of coverage than they will be for minimum coverage, but it’s important to recognize how catastrophic it could be to be at fault in a serious accident and on the hook for hundreds of thousands of dollars in medical bills.

If you can’t afford the limits mentioned above, then it’s worth exploring some options with your insurance carrier that offer more protection than the state minimum requirements. For example, you might be able to afford $100,000 of bodily injury liability per person, $200,000 per event and $50,000 in property liability. It’s important to note here that your property damage liability coverage should be enough to replace the other driver’s vehicle if it is totaled.

Again, liability car insurance is only one type of coverage. In Florida, you will also need PIP coverage and you may want to buy collision coverage as well. In most cases, you can get discounts for a good driving record and by bundling multiple vehicle insurance policies with a single carrier.

Car liability insurance is required in most states, including Florida. It is there to protect you in the event that you are determined to be at fault in an accident, and it can shield you from the financial repercussions of the accident by paying both for personal property damage and medical expenses derived from personal injuries. You should have a liability auto insurance policy with limits high enough to pay to replace the other driver’s vehicle and pay for injuries.

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