What is Liability Auto Insurance?

Liability auto insurance is an insurance policy that compensates the other driver, the passengers of vehicle, pedestrians or anyone else harmed or affected by a car accident in which you’re at fault. 

This auto insurance policy is specifically designed to protect you from financial burdens for a motor vehicle accident in which you are partially or totally at-fault. Also, if you’re sued by the other party, it also covers the legal costs required to deal with the court proceedings and covers fines as well.

Understanding How Liability Auto Insurance Works

It is crucial to properly understand liability auto insurance especially because it is mandatory in almost all states in the US except New Hampshire, and Virginia. In Florida, it is compulsory to only purchase the property damage component of the liability auto insurance.  

Speaking of components, liability auto insurance has three core components.

Bodily Injury per Person: This covers the medical expenses of each person affected by a motor vehicle accident in which you’re at-fault. It typically sets a limit on how much each person will receive for their medical treatment and caregiver services.

Bodily Injury per Accident: This covers the maximum medical expenses that your insurer will compensate for the accident in which you’re at-fault. If the overall medical expenses exceed your coverage limits, you will be responsible for any remaining costs out of pocket.

Property Damage: This covers the repair or replacement costs for damage to another person’s property in an accident you caused which includes vehicles, houses, mailboxes, or other tangible assets.

It can get confusing to understand how the compensation is covered for the bodily injury per person, and bodily injury per accident. So, here’s an example that shows how it actually works.

Let’s say you’re at fault in an accident, and you have:

• Bodily Injury Per Person Limit: $50,000

• Bodily Injury Per Accident Limit: $100,000

Three people are injured with the following medical costs:

• Person A: $40,000

• Person B: $60,000

• Person C: $30,000

Under your policy:

• Person A will be fully covered, receiving $40,000. 

• Person B will only receive $50,000 (up to the per person limit), leaving them with $10,000 uncovered.

• Person C will be fully covered, receiving $30,000.

Total paid by the insurer: $50,000 (Person B) + $40,000 (Person A) + $30,000 (Person C) = $100,000

If the total injury costs exceeded $100,000, you would be responsible for any amount over the per accident limit. Similarly, if you have a coverage limit of $10,000, then your insurer will compensate up to $10,000 from your liability coverage for any vehicle, and property damage.

Now that you know how liability auto insurance compensation works, and its mechanism, it’s time to learn what it covers, and what it doesn’t cover.

If you need help, and further assistance understanding auto insurance liability consider checking our PLPD insurance offerings. As a PLPD Insurance Agency in Michigan, we strive to offer the most affordable liability insurance policies within your budget.

What Does Liability Auto Insurance Cover?

Your liability auto insurance will only cover the medial bill, and property damage repair/replacement expenses incurred by third parties for a motor vehicle accident that you are legally responsible for.

It typically includes two types of auto insurance coverage which includes bodily injury and property damage liability coverage.

• Bodily injury liability coverage will protect you financially by covering the medical bills, caregiver services, and loss of income to compensate for an accident in which you’re at-fault. If the other party files a lawsuit against you, then it will also be covered by this auto insurance policy. 

• Property damage liability protection applies to compensate the damage to other’s person’s property for a vehicle accident that you’re responsible for. This includes repair and replacement costs of vehicles, house, fence, guardrails, mailboxes, trees, and any other tangible asset damaged during the accident.

What Does Liability Auto Insurance Not Cover?

The biggest limitation of the liability auto insurance is it does not cover your medical bills, vehicle repair/replacement expenses, and property damage costs. It does not cover the medical bills of any passenger in your vehicle either.

As it’s mentioned before, the liability auto insurance is particularly designed to protect you from the financial hardships of compensating the other driver, their passengers, pedestrians, and any third party affected by an accident in which you’re partially or totally at-fault.

Even though the liability auto insurance policy does not cover your bodily injuries, medical expenses, and property damages, it still provides you financial protection from compensating the other person out of your pocket. Plus, it also provides mental relief that you’re financially secure, or you can immediately compensate another person for an at-fault accident.

How Much Liability Auto Insurance Coverage Do You Need?

As it is legally mandatory to have a liability auto insurance policy in most states in the USA, there is a minimum liability auto insurance coverage that you must purchase. So, depending on the state that you’re residing in, you must purchase the minimum liability auto insurance coverage.

In many cases, the minimum liability coverage can be inadequate, depending on the severity of the accident you may need to compensate hundreds, and even thousands of dollars. So, if you want, you can always purchase any coverage above the minimum requirement, but that will come at a higher rate of course.

Minimum Liability Auto Insurance Rate by State

Source: Forbes as of January 2023

Liability Auto Insurance in Michigan

When it comes to auto insurance Michigan is somewhat unique. Despite being a no-fault auto insurance state, it is mandatory to have liability insurance in Michigan. Unlike other states, liability auto insurance is known as Personal Liability and Property Damage Insurance, which is commonly abbreviated as PLPD insurance.

According to the Michigan Government, here’s the standard auto liability insurance coverage in Michigan as follows:

• Up to $250,000 for each person injured or killed in an accident

• Up to $500,000 for each accident if multiple people are injured or killed

• Up to $10,000 for property damage in another state

On the other hand, if you think you don’t the need standard auto liability insurance coverage or if you can’t afford it then you go for the minimum liability auto insurance coverage which includes:

• Up to $50,000 for each person injured or killed in an accident

• Up to $100,000 for each accident if multiple people are injured or killed

• Up to $10,000 for property damage in another state

Remember, PLPD auto insurance is mandatory in Michigan, so you will have to get at least the minimum coverage. But if you can, it’s recommended that you acquire the standard coverage, or a higher limit within your budget.

An unfortunate at-fault accident can put you at a substantial financial risk for which the minimum coverage can be insufficient. So, to stay on the safe side, consider purchasing the best PLPD insurance coverage based on your needs and budget.

If you’re not familiar with PLPD insurance, you can learn more about what is PLPD insurance and how does PLPD insurance work in Michigan.

Bottomline: Do You Need Liability Auto Insurance in Michigan?

Yes, having a PLPD insurance policy is a mandatory legal requirement in Michigan for every vehicle owner and driver. So, you must have an active PLPD insurance policy to avoid legal repercussions.

You must also consider the fact that road accidents are very common in Michigan. According to Michigan State Police, there were 287,953 traffic crashes in Michigan in 2023 which led to 71,085 injuries, and over 1,100 fatalities. To keep yourself safe both legally and financially, you must consider getting PLPD insurance.

If you’re not fully aware of PLPD insurance, it be quite confusing. Our expert PLPD auto insurance agents can help, and guide choose the best PLPD insurance coverage within your budget. So, contact us now to get a free quotation today!

FAQ

What is Liability Car Insurance?

Liability car insurance policy covers financial costs to compensate the other driver, their passengers, pedestrians or any third party who have been affected/harmed by an accident in which you’re partially or totally at-fault.

Is Liability Auto Insurance Mandatory?

Yes, apart from New Hampshire, and Virginia, it is legally mandatory to get Liability Auto Insurance in every other state in the USA.

How Much Liability Auto Insurance Coverage Do I Need to Get?

It depends on which state that you’re located in, most US states require a minimum liability auto insurance coverage of 25/50/25. But if you’re residing in Michigan, the minimum liability auto insurance coverage is much higher, which is 50/100/10. Similarly in Alaska the minimum liability auto insurance coverage is 50/100/25. 

Does Personal Auto Insurance Liability Cover Business Use?

No, your personal auto insurance liability does not cover business use. For business purposes, you need to get business liability auto insurance.

What is Business Liability Auto Insurance?

Business liability auto insurance, also referred to as commercial auto insurance, provides financial protection for accidents where you or your employees are at fault, covering bodily injuries and property damage sustained by third parties.