Auto Insurance

What does liability insurance protect?

You would probably understand the sentence if I said, “you are liable to be liable”. Just the word “liability” seems to provoke a cautious response in most of us. But this is a word that has a double meaning in the English language.

The word liable has the meaning of “there is a possibility” such as the phrase, “you are liable to be upset”. There is a nuance of “could be” or “maybe” involved.

Used in the world of insurance, it has the meaning of “owing”, related to the word “fault”. It is also related to the word “responsibility”. Liability for something means that some condition or event occurred which put an individual or company into a position of being required to fulfill a legal responsibility set up by law, this could be a state or federal statute.

This responsibility is usually a financial type of requirement because, again, a condition or event occurred that caused law to become involved. That law then requires a response from the one responsible. Seems like a play on words doesn’t it?

Most laws in society are legislated into existence for the purpose of enabling people to function in the most harmonious possible environment. Most of the time this is true; those laws that become cumbersome or burdensome to society will usually, eventually be rejected.

The laws in most states of the USA, and in most countries around the globe require a vehicle owner to purchase and carry an insurance policy for your automobile, truck, boat, whatever you are driving. A part of the policy fulfilling the legal requirements of law is the liability portion. An insurance policy is a legal contract between you and your insurance company. That part of the policy covers “the other party”.

If you or I gets into an accident (unfortunately it happens) someone will usually be “at fault”. The policeman at the scene of the accident normally determines this as he gets the facts and fills out the accident report. The one at fault may get a ticket for causing the accident or for driving carelessly. There are many possible variations of this scenario.

So, both parties are carrying auto insurance policies. The one who is “at fault” has triggered the “liability” part of his policy, (his legal contract with the insurance company). Again, the insurance company has agreed to assume your risk of “liability” in exchange for your payment of the policy premiums.

Simplifying; you had a car accident with someone, you received the ticket from the police and were determined to be 100% “at fault” so your auto insurance policy pays for the damage you did to the other party’s vehicle. The part of the policy that does this is your “liability” insurance.

This is because, according to law, you are financially responsible for paying for the damage you did to the other party’s vehicle. If you did not have insurance you would still be “liable” for the damage done, but you then would have to take it out of your own savings account or other assets to pay for that damage.

Most people in society are not blessed with the capability to become completely “financially responsible” without the help of an insurance policy. It costs quite a bit to repair that beautiful Cadillac Escalade you or I just connected with now days. Even if you did have the cash in the bank, you would typically not want to put that cash at risk, you would much rather pay the premiums on an auto insurance policy to fulfill your duty to the law, and to society.

I have not brought up bodily injury liability in case you hurt another driver or his passengers or the passengers that might be riding in your car. In some states there is a “no-fault” provision for your medical expenses up to a predetermined limit; costs going above that would trigger your liability coverage to pay for excess medical expenses of the injured party(s). Depending upon the laws of your state this also could put you into a situation where you owe an injured party due to becoming legally (statutorily) liable.

In the world of driving, no one goes out to the car in the morning planning on having an auto accident. Keep the financial burden from hanging over your head and purchase an insurance policy that will protect you for the actions where you are liable.