How does liability car insurance work?

Liability Insurance

Liability insurance is a protection for the policyholder who is at fault in an accident. In particular, liability insurance is available to auto, homeowners, commercial, and watercraft insurance. This form of insurance has coverages that protect the policyholders from a lawsuit. There are two components of liability car insurance: bodily injury and property damage liability. Furthermore, without carrying at least a minimum amount of liability coverage, you will pay for the damages you might cause to others with a serious amount of money out of pocket.

How does liability car insurance work?

Liability insurance is a protection for the policyholder who is at fault in an accident. In particular, liability insurance is available to auto, homeowners, commercial, and watercraft insurance. This form of insurance has coverages that protect the policyholders from a lawsuit. There are two components of liability car insurance: bodily injury and property damage liability. Furthermore, without carrying at least a minimum amount of liability coverage, you will pay for the damages you might cause to others with a serious amount of money out of pocket.

Liability Insurance Coverage

Components of Liability car insurance; 

Bodily Injury Liability

This form of liability coverage covers the medical expenses after an accident that you are responsible for. 

  • Pain and suffering
  • Ambulance and Hospital care
  • Doctor’s visit/ Rehabilitation
  • Lost wages
  • Funeral expenses
  • Related legal costs

Property Damage Liability

This form of liability coverage covers the expenses for the damages to the third party’s property or cost of loss of use in which you are legally liable. Property damage liability covers; 

  • Repair for the damages in the vehicle
  • Repair for damaged structures caused by the accident
  • Debris removal

Single Limit Liability

This form of liability coverage is an insurance policy that limits the coverage for all types of claims in a single dollar amount. Single liability limit policy has a maximum amount that covers injuries or property damage in an accident combined. This policy includes claims for one person or several.

What is not covered by Liability Insurance Coverage?

Liability coverage is designed to protect the policyholder against lawsuits of bodily injury and property damage due to an accident the insured is at fault. Usually, this form only covers the damages to others, but it won’t cover any losses in your part as the policyholder. However, there are additional coverages that may include your personal needs. 

Additional Coverages

Medical payments/ Personal Injury Protection (PIP)

This coverage covers the medical expenses that also includes lost wages after an accident, regardless of who is at fault.

Collision Coverage 

This coverage covers the repair and replaces the damages of your vehicle damaged in a car accident with another vehicle or any falling objects. If you are financing a car, the lender may require this kind of car insurance coverage.

Comprehensive Coverage

This form of coverage covers the repair and replaces the damages of your vehicle in a covered peril accident, such as fire, theft, vandalism. 

Uninsured/ Underinsured Motorist Coverage 

The uninsured motorist coverage protects you in an accident that damages caused you by a driver who is not carrying any liability insurance to cover the damages. On the other hand, underinsured motorist coverage covers the damages if you were hit by a driver that carries insufficient liability to cover the entire cost of the accident.

Does your Personal auto policy cover Business use vehicles?

The personal auto policy provides the same coverage as the commercial auto policy offers, however, a personal auto policy does not cover vehicles that are primarily used in business. Besides, if you have your own auto policy, the insurance provider will cover the expenses up to the policy limit. Your particular auto insurance provider typically does not provide any coverage on behalf of your business.  In the event you or your employees are driving personal vehicles in business services, make sure you have sufficient liability coverage to secure your business protection in a serious auto accident.

What are Hired and non-owned auto insurance

This form of liability insurance coverage covers bodily injury or property damage that you or your employees may cause while driving for work. This coverage covers vehicles hired like rental cars or any vehicles that your business doesn’t own, such as employee’s personal vehicles. Hired and non-owned auto does not provide coverage for collision damage.

Hired Auto

This type of coverage covers the gap in your personal auto liability insurance in driving for work. It can cover the liability coverage you may need for a rental car. It is vital to understand that hired auto coverage can cover your business liability; however, it does not provide liability coverage for the person who is driving the car. 

Non-owned Auto

This type of liability coverage covers legal expenses in the event your business is sued in a car accident; you or your employees are the ones responsible while driving a personal vehicle in conducting business operations. Same in hired auto, it covers business liability to fill the gap in personal auto liability coverage, in which it does not include business driving. It is vital to understand that whoever is behind the wheels can be responsible for any damages or injuries they cause.

Is having minimum liability coverage enough? 

It is a requirement for business owners to carry at least a minimum amount of liability coverage varied by state. Most business owners purchase more than the state requirements of minimum coverage. Every business owner needs to purchase an amount of liability that can protect their business in claims in a significant amount.

What is Commercial Umbrella Liability Insurance?

Umbrella insurance policy is an extra amount of liability coverage that goes above your standard commercial liability policy limit. This form of insurance policy provides additional protection for businesses at risk of being sued for damages to other individual’s injuries or properties in an accident. A commercial umbrella policy provides coverage for bodily injury, property damage, and certain lawsuits.

How do  Commercial Umbrella Liability Insurance works? 

Commercial Umbrella insurance covers certain liability claims that your standard commercial liability policy may not be enough to cover. You can only purchase an umbrella policy if you have a standard commercial policy, it may be useless if you purchase an umbrella policy all alone. For instance, you are liable in an accident and responsible for the expenses, which cost $1.5million; however, your commercial liability car insurance can only cover $1 million. That’s when the commercial umbrella policy takes in to cover the remaining $500,000.

What does your Commercial Auto Liability Insurance does not cover? 

Commercial auto liability insurance also comes with exclusions. You have to purchase a separate policy to cover your other business needs.

These are some typical commercial insurance that businesses must consider. 

Workers’ Compensation Policy

This form of business insurance protects employers against certain claims made by their employees and provides benefits for employees who suffer injuries while conducting their work. Worker’s compensation or also called workers’ comp is a state mandatory, especially in California, to carry by every employer that contains at least one employee. 

General Liability Insurance

General liability is also known as business liability insurance. It covers your business against broad claims involving bodily injuries and property damage resulting from your products, operations, or services. Furthermore, this form of liability insurance may include you if you are responsible for the damages to your landlord’s property.

Commercial Property Insurance

This form of insurance protects business property and equipment against disaster risks such as fire, theft, and natural disasters. Commercial property is a form of insurance that every company needs, regardless even if you own the building, leasing, or work from home. It is one of the coverages bundled in general liability in business owners’ policy insurance. 

Business Owner’s Policy (BOP)

The business owner’s policy (BOP) is combined protection for all properties and liability risks in one insurance policy. This policy includes Commercial Property and General Liability coverage. BOP generally provides coverage for a business owner’s against property damage, peril, business interruption, and liability. 

Cyber Liability Insurance

This form of insurance helps businesses to cover business liability for a data breach of customer information such as Social security numbers, Credit card numbers, account numbers, and health records. Cyber liability may cover legal fees, restoring the personal identities of customers, recovering compromised data, and repairing damaged computer systems.

Error and Omissions Insurance (E&O)

Errors and omissions insurance is a form of professional liability insurance that covers the company, its workers, and other professionals from claims of inadequate or negligence. Additionally, this form of liability insurance usually protects companies against costs of claims made by a client against professionals such as consultants, lawyer or financial advisers. 

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