What Is Liability Insurance?

Hey everyone, it's Marianne from Experian, and today I'm going to be talking about the ins and outs of liability insurance. If someone sues you over injuries or property damage that are your fault, it could spell major trouble for your finances. But that's where liability insurance comes in. This type of coverage is baked into most car, home, and renter's insurance policies. Understanding the finer points can help you figure out how much liability coverage you might need. Let's start with car insurance. Most states require drivers to carry some level of liability coverage, which typically covers hospital expenses, car repair bills, and lost wages that someone else suffers because of an accident that you caused. And if someone turns around and sues you, your legal fees should be covered as well. If you're in an accident and the other driver is at fault, their liability insurance might cover your injuries and damages to your car. Let's shift gears and talk about homeowners and renters insurance. Most policies include a basic amount of personal liability coverage. So if someone slips and falls at your house and decides to take you to court, your liability coverage will pay for your legal fees and any financial damages they are awarded up to your coverage limit. Homeowners and renters liability insurance also covers damage that you or your family members caused to other people's property, like your child breaking a neighbor's window, for example. You might be wondering how much liability insurance you need. For homeowners and renters insurance, coverage limits usually begin at around $100,000. Meanwhile, the minimum dollar limits for auto liability coverage vary from one state to the next. Drivers in New York, for example, must carry at least $10,000 in property damage liability per accident. But in New Jersey, that number jumps to $25,000. You also have the option to add extra personal liability coverage above your policy's limit. This is called umbrella coverage, and it could give you peace of mind if your existing coverage isn't quite enough. If your liability insurance limits fall short of the value of your assets, like your home and your savings account, umbrella insurance can bridge that gap and help safeguard your finances. For more on liability insurance and how it works, follow the link in the description box. See you next time.