If the cost of a claim exceeds the coverage provided by your insurance policy, the insurance company will not pay. By way of illustration, in Arizona, if you cause an accident that results in $70,000 in medical bills for the other motorist, you will be responsible for $40,000 of those costs if you have only the legally mandated minimum insurance coverage.
If you don’t have enough money to cover the total bill, the other driver can sue you and take legal action to seize your property or garnish your wages.
While Buying Auto Liability Insurance, Keep These 4 Factors in Mind
1. Liability standards vary by state
Most jurisdictions necessitate some extent of protection against financial loss in the event of injury or damage to another party’s property. In addition, drivers in some jurisdictions are mandated to carry optional forms of coverage, such as uninsured motorists, PIP, and MedPay. You must have at least the bare minimum coverage mandated by your state law, and it is highly advised that you obtain as much coverage as you can afford.
2. The more assets you have, the more protection you should have
The value of your possessions should be taken into consideration when determining the appropriate level of motor liability insurance. If the other motorist decides to sue you after an accident, it might have devastating financial consequences, especially if you own a home or have substantial resources.
The other motorist can sue you for the remaining $100,000 if you are at fault in an accident that causes $135,000 in property damage, but your insurance only covers $35,000. Everything on your property could be seized to satisfy a judgment if the lawsuit is successful.
3. You can require supplementary forms of coverage for your insurance.
You should look into more than just liability coverage while shopping for auto insurance. In the event of an accident, you need both collision insurance to cover the costs of repairs to your vehicle and PIP insurance to cover medical bills. It’s a good idea to have comprehensive insurance on your vehicle as well, in case something happens to it besides an accident, such as a tree falling on it or vandalism.
4. Programs tailored to high-risk drivers are available at the state level.
If you are unable to get auto insurance through the private market due to a preexisting condition, you may qualify for one of the several state-run alternative programs. These programs’ insurance is very expensive. Thus, they should be considered only as a last alternative.