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Liability coverage protects you if you (or another
person driving your car with your permission)
injure or kill someone or damage property.
Assume an accident for which you are clearly
responsible: You run a red light, strike another
car and injure the driver. Your liability coverage
obliges the company to defend you -- in court,
if necessary -- and pay claims to the other driver
for vehicle damage and bodily injuries, including
medical and hospital costs, rehabilitation, nursing
care, and possibly lost income and money for pain
and suffering. (The liability section of your
policy does not compensate you for damage to your
own car or any injuries to you. They are covered
by other parts of the policy.)
Now assume that you're involved in a collision
at an intersection with no witnesses or evidence
to pin the blame on either driver. Again, under
your liability coverage, your insurer agrees to
defend you against most proceedings the other
driver may take against you.
The company limits its liability payments to
the policy limits, or the amount of coverage you
select. You can be held personally accountable
for any excess.
Liability coverage is mandatory in nearly all
states (the others have financial-responsibility
laws that can be met by purchasing this coverage).
But state requirements are modest -- typically
$20,000 to $30,000 for bodily injury suffered
by one person in an accident, $50,000 for all
people hurt in the same accident, and up to $25,000
for property damage resulting from that accident.
Alaska, which has the toughest requirements,
dictates $50,000 of coverage for one person's
injuries, $110,000 for all those hurt in the same
accident, and $25,000 for property damage.
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