Almost every state has laws stating that people have auto insurance, but the actual regulations regarding auto insurance vary from state to state - so the type of coverage that you require depends on the state in which you live in.

Even if there are no laws, it is highly recommended that you have some form of cover; otherwise you may end up paying out huge amounts of money in the event of an accident, or even losing your home, in a worst-case scenario.

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What is Auto Liability Insurance?

Auto Insurance Liability is an issue that is vital to understand in order to assess the amount of coverage you require from your policy. The article will provide you with a basic understanding of the subject matter.

Liability Insurance Coverage can be included in a policy to provide cover for bodily injury or property damage caused by the policy holder in an auto accident. Liability protection will pay for the medical costs and repair costs involved.

Bodily Injury (BI) Coverage is also important. If you cause someone an injury through an auto accident that is your fault, your liability insurance will pay for the medical costs involved. A policy will often have split limits in a form such as 30/60/20. This separates the total available to cover injuries for one person from the total amount available to cover the whole incident. In this example, $30,000 is available to cover bodily injury per person, with a maximum of $60,000 overall. The '20' relates to property damage, which will be detailed shortly. Some insurance policies have a combined single limit only.

Property Damage Insurance is also required in case you damage another person's property in an accident. This can also include the car of the other driver, as well as stationary objects such as road signs etc. In a split-limit policy the third listed number (in our example 20) applies. Combined policies again list a single amount to cover both bodily and property damage.

Minimum liability insurance coverage levels are required in some states, but it is often recommended to have higher levels of coverage. There is no way of forecasting an accident, or the amount of property damage and personal injury that can be caused, so it is always best to err on the side of caution. People are always tempted to reduce their liability limits in order to save money on their insurance policy, but do not do something you may regret in the future just for the sake of saving a few dollars a month.

The lower your insurance liability limit is, the lower the cost of your premium will be, so the best idea is to work out what you will be able to pay out of your pocket in the unfortunate event of an accident. If you have little money in your account then you will be taking an unnecessary risk if you reduce your limits of liability.

Car Insurance Q & A

Question: If someone borrows my car and crashes it, does my insurance apply, or does theirs?
Answer: Generally speaking, the liability follows the car, so your insurance would apply, as it is your car. The liability insurance of the driver often pays the additional amount if the costs payable are above your policy limits.

Question: If a child goes to college with mom or dad’s car, are they covered under the parents’ personal auto policy?
Answer: This can vary from company to company. Check with the insurance provider and make sure that the child is listed as an additional driver. Do this before the child goes to college, and it will avoid unnecessary disputes later on.

Question: Do I need ‘gap’ insurance?
Answer: If your vehicle is on finance, and its value is now less than the amount you owe, then yes you need gap insurance. If you owe less than its value, then no, you do not need gap insurance.