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What is Liability Insurance and Why do I need it?

Updated on February 3, 2012

Every licensed driver that owns a vehicle is required by law to have some type of liability minimum on their car and insurance is the only way to avoid legal trouble. Even if your car is currently sitting in a garage and not being driven, it is necessary to have at least a minimum coverage car and insurance policy for it. When you think about owning a vehicle, you know that you will have to have a valid registration and license plate for it. Many people forget about the expense of having a car and insurance as well.

Since it is required by law to have some form of liability insurance for your vehicle, it is important to learn and understand the basics of how insurance works. There are many types of car and insurance policies to consider and many different companies to choose from as well.

Why You Need A Car and Insurance

When you are out on the road driving your vehicle, you are always at risk of being involved in an accident. Accidents are not planned events and everyone is vulnerable to their destruction. This is why states require their drivers to have at least some form of car and insurance in place while driving a vehicle. Insurance is a form of protection for all drivers that are out on the road.

Property damage liability insurance will pay for any damage inflicted on another person’s vehicle when you are involved in an accident that is found to be your fault. This type of insurance not only protects you from lawsuits and financial distress, it also protects the other individual’s who are out on the road that you could be involved in an accident with.

How Property Damage Liability Insurance Works

If you are involved in a car accident with another individual, it is not likely that they are going to walk away without some form of compensation for the damages you caused to their automobile. Depending on the type of accident you are involved in, replacing or repairing their vehicle can become quite expensive. This is where property damage liability insurance comes in. Your liability insurance policy will pay for the repair or replacement of the damaged vehicle, minus your deductible. The combination of your car and insurance (liability) can greatly reduce overall out of pocket expenses to you, the driver.

If your policy has a deductible of $1000, and the damage to the car and insurance company comes to $5000, you will be responsible for paying the first thousand dollars of the damage and your insurance company will cover the rest of the total. Some times the damaged vehicle is not worth repairing and the insurance company will pay to replace the vehicle.

Some times people are involved in accidents that do not involve another vehicle, but damage someone’s property instead. This could be a fence or someone’s yard, etc. Property liability damage will help pay for the damage that is done to a person’s personal property due to your car and insurance will cover the damages minus the deductible.

Types of Property Damage Insurance

There are many choices when it comes to your car and insurance coverage. Typically, a policy will pay a certain amount of the damage for a vehicle involved in an accident. The amount of coverage that you need will depend on the laws of your state, as each state has their own minimum liability policies.

However, sometimes the state minimum is simply not enough coverage. When choosing a liability insurance policy it will be important to make sure you have enough coverage to protect your assets should you ever be involved in an accident. $50,000 replacement protection is enough to replace most vehicles that are on the road, depending on the area that you live in. Financially protecting yourself with car and insurance liability protection may be a gamble, but outweighs the risk of none at all.


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