Auto Liability Insurance 101

Auto Liability Insurance 101

Who Needs Liability Insurance?

The short answer - anyone who drives a vehicle.  Most of us who have a car have an auto insurance policy but many people dont know exactly how it protects them.  In this lesson we will guide you through the basic purpose and coverage in a standard auto policy.

It would be fair to say that not everyone has a positive view of insurance.  If you are driving in this country you NEED to have auto insurance it by law (in most states.)  Even though we have to carry it, there are many examples of people who never get into an accident or make a claim. 

 

Consider this:

  • Have you been in a car accident before?  If so, what emotions would you use to describe that experience?
  • In addition to repairing or replacing your car, what are some other things you might need coverage for in an accident?

 

Car accidents can be devastating, and in my 20+ years of working in the field I have spoken with many policyholders who were hurt or who have lost family matters in a crash.  It is a humbling and powerful experience to be able to help them through that terrible time, and they will need your expertise to obtain peace of mind.  In addition to the customer's own losses, they may have also caused damage or injuries to others.  So, the first part of the policy you are going to explore is liability coverage.

 

 

Part A: Liability Coverage

Liability coverage protects you by paying a third-party for property damage or injuries which you were legally responsible for causing. 

It also includes any defense costs that were incurred up to the limit of liability.

Most policies have single or splil limits of liability. To see how they work, review Slide 2.

Policyholders work with agents to determine what coverage limit to select.  The higher the protection, the more premium the insured will pay for that coverage on an annual basis.

Liability coverage can be the most important part of the policy, because if you are negligent for damages and you are not properly protected, the injured party can legally pursue you and your assets for recovery. 

The key point here is that liability coverage does not pay the policyholder or their family members - it pays the other people involved in the accident.  If the policyholder is hurt, they can use their Medical Payments coverage for help.  We will talk more about that coverage in another lesson.

 

Activity 1: Scenario Practice - Split Limits

Activity:  Slide 3

Let's give you an opportunity to put this into practice.  On the above-referenced slide there is a scenario.  Let's see if you can correctly calculate how much the insurance company would pay total under the liability section of the policy.

When you are done, see Slide 4 to check your answer.

Activity 2: Scenario Practice - Single Limit

Activity:  Slide 5

Let's give you an opportunity to put this into practice.  On the above-referenced slide there is a scenario.  Let's see if you can correctly calculate how much the insurance company would pay total under the liability section of the policy.

When you are done, see Slide 6 to check your answer.

Conclusion

Now you should have a better understanding of liability coverage and how it is applied.   Thank you for your time today.  Next up in the Insurance 101 tutorial - Part B Medical Payments coverage!