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Your auto liability insurance coverage will typically have three limits: bodily injury for each person, bodily injury for all persons involved, and property damage. Your insurance company will pay up to that established limit. If costs exceed your limit, you will have to pay out of pocket.

If you have a 30/60/15 policy, this means your insurance company will pay up to $30,000 for one person’s bodily injury costs, up to $60,000 for all bodily injuries in the accident, and up to $15,000 for property damage.

Note that some insurance companies issue “single limit” liability policies, instead of split limit policies. A single limit policy would cover the costs of injuries and property damage together, up to the total limit.

For example, a 300 policy would cover $300,000 of bodily injury and property damage liability combined after an accident.

If you cause a crash in which people are injured and the other vehicle is damaged or totaled, here is how your insurance will pay the costs if you have a 30/60/15 split limit policy:

• Your liability insurance will pay up to $30,000 for any one injured person, including hospitalization, treatment and lost wages.
• It will pay up to $60,000 for all injury costs if multiple people are injured.
• It will pay up to $15,000 for all property damage you cause.

If the total costs of the accident amount to $100,000 for all injuries and lost wages, and $20,000 in property damage, the out-of-pocket costs you will be responsible to pay are:

• $40,000 in bodily injury costs
• $5,000 in property damage costs
• Totaling $45,000 out of pocket

Based on your policy, you would have to pay $45,000 in out-of-pocket costs to cover your legal responsibility.

Unfortunately, many people purchase only the minimum liability coverage required by their state, leaving them exposed to enormous expenses if they cause an accident. Be sure to talk with your agent about the appropriate amount of liability coverage for your financial protection.

You may also want to consider an “umbrella policy,” which can provide excess liability coverage that can protect you if your legal responsibility in an accident far exceeds your auto liability coverage limits.

If you cause an accident or cause injury to another person or their property with your vehicle, your liability insurance will help to cover your legal obligation, up to the limits of your policy.

There are two types of legal obligation:

Bodily injury liability: If you cause an accident that harms another person, your liability coverage will pay for “pain and suffering” claims, medical expenses including hospitalization and surgery, and even lost wages for the injured parties, up to your policy limits. Bodily injury liability typically has two limits: one for each person injured, and one for the total injury costs of the accident.

Property damage liability: If you cause an accident that damages or destroys another person’s car or truck, your liability insurance will pay for the repairs to the other driver’s vehicle, up to your property damage limit. Likewise, if you run into a building or drive into a hedge, your property damage liability coverage will cover the costs of replacing or repairing the damaged items.

Liability insurance also helps to cover the costs of lawsuits arising from an accident. If an injured driver or passenger files a lawsuit against you, your liability insurance will help to pay for your legal defense. Note that you will probably need legal defense in court, whether or not you are found at fault for the damage.

Liability is defined simply as legal responsibility for one’s acts or omissions. Liability insurance can cover people for things they neglect to do in addition to mistakes they make.

With regard to car insurance, liability is nearly always associated with a driver’s actions. If you cause an accident, whether by driving aggressively, running a red light or not paying attention, you are responsible – or liable – for that accident.

If you select a higher deductible, you will be responsible for paying more out of pocket. However, you’ll typically pay a lower policy premium. The opposite is true if you select a lower deductible option: because the insurer will pay a larger portion of any loss, you’ll typically pay a higher policy premium.

A deductible is the amount you’re responsible for in the event of a covered loss. In most covered loss cases, you are responsible for any amounts up to your deductible level and your insurance would cover anything beyond that up to your coverage limit. For example, if you select a $1,000 deductible and have a $4,200 covered loss, you would receive a claim payment of $3,200 after deducting the $1,000.

A deductible applies to each claim. If you have more than one claim in a policy period, you will be responsible for the deductible amount for each individual claim regardless of the number of claims you have during that policy period.

Collision is defined as losses you incur when your automobile collides with another car or object. For example, if you hit a car in a parking lot, the damages to your car will be paid under your collision coverage.

Comprehensive provides coverage for most other direct physical damage losses you could incur, including theft. For example, damage to your car from a hailstorm will be covered under your comprehensive coverage.