How Important is Basic Liability Auto Insurance?

by Hank Coleman

How Important is Basic Liability Auto Insurance?In a world where people can be quick to seek out unfair compensation and sue for almost any small incident, it’s important that you keep yourself financially secure with liability auto insurance for your vehicle. You see, you can’t always control when, where, or how an accident will occur, but you can control and potentially limit how much an accident will cost you with the right amount of liability auto insurance.

In order to understand whether liability car insurance is a necessary investment, it pays to take a closer look at some of the leading benefits liability auto insurance offers.

How Important is Basic Liability Auto Insurance?

Be Sure to Meet the Minimum Requirement

In every state except New Hampshire, liability auto insurance is required so that drivers are protected from mistakes or accidents that are not their fault. People who drive without this kind of insurance can expect to pay a hefty fine or worse.

However, the finer details of the law are different from state to state. So, make sure your liability insurance safety meets the required standards where you live.

Ultimate Checklist for Your Finances

Take back control of your finances!

Get a FREE checklist for the money moves to make in the New Year.

Also get new articles, advice, and tips delivered right in your email inbox with our newsletter!

The minimum requirements for liability auto insurance will vary in regards to both areas that liability insurance covers – property damage and bodily harm. This is to ensure that drivers who are not at fault in minor accidents can be completely covered.

The Two Parts to Liability Insurance

When looking into liability auto insurance, you’ll find that liability auto insurance is comprised of two separate, yet similar, parts. These parts work together to provide the coverage you need to be financially secure if you cause an accident. They cover both damages sustained to vehicles and property and injuries sustained by the individuals involved in the accident.

The first part is property damage liability coverage, which caters to the costs of repair for any damages done to other vehicles, buildings, or other property. This is a vital part of liability car insurance.

Damage done to property can range from as low as $100 worth of body work to as high as the price of a brand new sports car. So take this into account when considering your insurance policy. Of course, you can’t always control when, how or where you’re going to get in an accident.

The second part is bodily injury liability coverage, which involves any medical bills incurred by passengers, drivers or any other people involved. When choosing a policy, you’ll have to make two important decisions while considering bodily injury coverage.

First, you’ll have to decide how much coverage you need to cover the victims in the accident. Second, you need to decide on a total amount of injury coverage, which will be split amongst those who are injured.

For example, you may choose to cover each person for $50,000, while getting a total coverage of $150,000. This will either cover the total costs of three people if their medical bills are $50,000 each, or can cover up to a total of $150,000, regardless of how many people are injured.

Most states have required minimum levels of coverage for property damage and bodily injury. Be sure to insure that it is the right amount of coverage. In many states, the required minimums are quite low. 

You may also want to consider investing in an umbrella insurance policy that will provide even more protection if you were to be sued.

How Great Insurance Can Provide Financial Security

The reason why so many people choose to acquire more than just liability insurance is because the insurance provides financial security when accidents happen. It’s a way of being able to cover unexpected costs, which can often be very high.

Imagine being in an accident, losing your ability to work, and being responsible for medical bills that you can’t pay. This can be even more compounded when you are at fault and are responsible for the payment of others’ bills as well. This is a nightmare that nobody wants to experience, and it is precisely why liability insurance is a requirement by law.

According to The Simple Dollar, some financial experts actually advise people opt out of covering their own vehicles if the car is old, inexpensive to repair, or in need of replacement. This way, you are covered for any damages done to other vehicles without worrying about your own. This saves you money that you can then set aside for a new vehicle should an accident occur.

But, you need to check the prices between having comprehensive coverage and not having any. Often the price difference is very small between the two policy coverages. It may benefit you with peace of mind just to get full coverage in many instances. I’ve found that it is just a few more dollars a month for me to have full coverage even on my beater of a car that I own outright.

Liability auto insurance is important, required by law, and can ultimately save you money. It can also aid in your peace of mind. Just be sure your liability auto insurance policy is catering to your unique needs.

Have you checked your Liability auto insurance? Have you found that it doesn’t cover everything you need?

How Important is Basic Liability Auto Insurance?

myFICO Score Watch Trial

About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]

Hank Coleman has written 578 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.

Subscribe To Money Q&A

If you want to learn more about taking back control of your money please subscribe to Money Q&A’s RSS feed or via email to receive all the latest articles! You can also subscribe to our Free Weekly Newsletter.

Previous post:

Next post: