Understanding Auto Liability Coverage: What It Protects and What It Doesn't

What is Auto Liability Coverage?

Liability coverage is the foundation of auto insurance. It protects you financially if you cause an accident that injures others or damages their property.

Two Components of Liability

Bodily Injury Liability

Covers medical expenses, lost wages, and legal costs when you injure someone in an accident you cause.

This includes:

• Emergency medical care
• Hospital stays and surgery
• Rehabilitation
• Lost income
• Pain and suffering (in lawsuits)

Property Damage Liability

Covers damage you cause to:

• Other vehicles
• Buildings and structures
• Fences, mailboxes, landscaping
• Other property

Understanding Coverage Limits

Liability limits are typically expressed as three numbers, such as 100/300/50:

• First number ($100,000): Maximum per person for bodily injury
• Second number ($300,000): Maximum per accident for bodily injury
• Third number ($50,000): Maximum for property damage

Why Minimums May Not Be Enough

Medical Costs

A serious injury can easily exceed $100,000 in medical bills. Minnesota's $30,000 per person minimum may leave you personally liable for the difference.

Vehicle Values

Modern vehicles, especially trucks and SUVs, can cost $50,000-$100,000. Minnesota's $10,000 property damage minimum is often insufficient.

Legal Exposure

If damages exceed your coverage, you could be personally sued for:

• Home equity
• Savings and investments
• Future wages
• Other assets

What Liability Does NOT Cover

• Damage to your own vehicle
• Your own medical expenses
• Intentional damage
• Damage while using your car for business (without commercial coverage)

Choosing Appropriate Limits

Consider:

1. Your net worth: More assets mean more to protect
2. Your income: Future earnings could be at risk
3. Your risk exposure: Commute length, driving frequency
4. Cost: Higher limits are often affordable

Many advisors suggest at least 100/300/100, with an umbrella policy for additional protection.

Next Steps

Review your current policy and consider whether your limits adequately protect your financial situation.