Having the right auto insurance policy is essential for protecting yourself and your finances in the event of an accident. Liability insurance is a key component of any car insurance policy, and it provides financial protection to drivers who cause harm to another person or their property while driving. All states, except New Hampshire, require drivers to have some degree of liability coverage. The two components of auto liability insurance are bodily injury liability and property damage liability. Bodily injury liability helps pay for the other driver's medical bills, lost income, and emergency help if you're injured in the car accident and you're at fault.
Property damage liability helps pay for repairs if you damage someone else's property, such as their fence or car. Failing to obtain liability coverage could result in the suspension of your license, fines, or jail for repeat offenses. Auto liability insurance can help protect your finances if you are found guilty in an accident by paying for damages to other people and property, as well as legal fees for you. A general rule of thumb is to buy enough liability insurance to cover what you might lose in a lawsuit, depending on your assets. Gap insurance is another type of coverage you might need if you drive an expensive vehicle that is likely to depreciate relatively quickly. Bodily injury liability coverage can protect your home and other assets in the event that a driver or passenger sues you after an accident.
It's recommended that you purchase liability coverage that is equal to or greater than your net worth to ensure that you don't lose assets if you are sued. With so many options for auto insurance companies, it can be difficult to know where to start to find the right car insurance. While a good auto insurance policy is comprised of several types of coverage, liability insurance is the foundation. For example, if you're a homeowner and savings owner, you'll likely want to purchase liability insurance that far exceeds your state's minimum requirements. If your car isn't worth much, you might want to skip buying collision insurance and comprehensive car insurance.
