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Liability Limits On Your Auto Insurance

Today, auto insurance has changed quite dramatically. Becoming vastly focused on how quickly a quote can be obtained or how much money can be saved. But what are customers really buying? Some of the most basic fundamentals of auto insurance have become lost in the marketing hustle of quick and cheap insurance. Many will throw around terms like “liability only” or “full coverage” without a full understanding of the meaning. The basics of insurance are for more too important to not be understood.

Liability limits are the most fundamental coverage associated with auto insurance. Liability is the coverage that pays damages to another party after and accident you cause. Simply put, liability limits pay for the damages of others, not the policy holder. Liability coverage is separated into two parts; bodily injury and property damage. Bodily injury will pay for other party injuries while property damage will cover damaged property.

What is unique about this coverage is the fact that the customer has the ability to choose what liability limits they want to carry. States issue a minimum limit that all drivers must carry and the consumer can choose to increase these limits as they see fit. Unfortunately, state minimum limits are often far to low to truly offer the protection needed. However, those low limits can offer a lower auto insurance price which in turn makes state minimum limits more prevalent.

One common mistake made by insurance buyers is electing lower liability limits because the vehicle they are driving is older or does not carry much value. It is important to note, that your vehicle does not have anything to do with the liability limits that you elect. Liability limits are designed to protect the financial well being of a policy holder after accident occurs.

It is important to understand what liability limits are being selected because any damage over the elected amount becomes the responsibility of the policy holder. So if the liability portion of a policy will only pay $20,000, and a driver causes and accident costing $50,000, the remaining $30,000 becomes the driver’s responsibility. Often this sort of scenario will result in a lawsuit which ultimately costs a policy holder much more money than the increased liability limits would have.

Before buying your next auto insurance policy, discuss the importance all of your coverage selections with a knowledgeable insurance agent. A quality agent should be able to explain each coverage in an understandable manner and make recommendations that are right for you. All the while taking into account your budget and your overall well being. 

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Allied Insurance at The Insurance Loft

1630 Welton St. Ste. 202
Denver, CO 80202
1 (888) 688 1446

By Brian Cook