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UPDATED: Mar 13, 2020
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Causing an accident can be the most regrettable experience in a person’s life. Serious injuries and significant property damage may result from an avoidable accident. In the aftermath, at-fault drivers rely on car insurance for financial protection from civil judgments.
Even long-time policyholders, however, might only peripherally understand how car insurance works. Drivers require more than a basic understanding of auto insurance coverage when at fault for an accident. The proper comprehension of a policy may lead drivers to take responsible action after a collision. Compare the best rates for the coverage you need without free insurance comparison tool above!
How does car insurance work?
Car insurance coverage takes many different forms with auto liability coverage being the most widely known. Coverage exists when an insurance company sells a policy to an approved customer. The insurance company sets a premium price based on the level of risk the driver reflects.
Reliable comparison shopping may reveal great rates even for those with weak driving and credit records.
Once the insurance company sells a policy to a customer, the company has agreed to cover specifically defined losses on behalf of the customer. Losses are covered up to policy limits. $100,000 in coverage means the insurance provider only pays to that amount.
Bear in mind settlement payouts are restricted to appropriate coverage delineations. Auto liability coverage, for example, won’t cover losses for a stolen vehicle. Theft falls under comprehensive insurance coverage.
What is auto liability insurance?
Auto liability insurance refers to payments for bodily injury, loss of life, and property damage caused by an at-fault driver and inflicted on others. This type of insurance is compulsory in tort (fault) states. At the core of auto liability claims is negligence.
Negligence must be present to some degree in order to make a liability claim. Consider the following two scenarios:
Traveling Through a Stop Sign
The law states drivers must come to a complete stop at a stop sign. Failing to see a sign, an SUV driver does not stop and crashes into a compact car. Both vehicles suffered damage and both the compact car’s driver and passenger are injured.
Due to negligence, the SUV driver is at fault. A claim could be filed against his/her insurance policy under liability coverage.
Improper Claims of Liability
The driver of an SUV travels too slow for the tastes of a motorcyclist. So, the motorcyclist chooses to pass the SUV illegally on the shoulder of the road. In doing so, the motorcyclist hits an object and crashes.
Afterward, the motorcyclist attempts to file a claim because the slow-but-legal speed of the SUV driver contributed to the motorcyclist’s illegal pass. Such a claim would be dismissed outright. The SUV driver was not negligent. The motorcyclist was.
Questions about negligence find answers during the claims investigation process.
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The Claims Process
The injured party may file a claim against the at-fault driver’s insurance company. In some cases, the injured party retains a lawyer and files a lawsuit. The insurance company might appoint a lawyer on behalf of a policyholder to defend or settle the suit.
Policyholders should check their policy contract review the rules and terms regarding the insurance company’s legal representation assistance, if any, during a lawsuit.
Make no assumptions regarding the insurance company’s obligations to appoint and pay for an attorney. Confirm the insurance company’s obligations when reviewing quotes and purchasing a policy.
When an accident occurs, the policyholder should contact his/her auto insurance company and report the incident without delay. An investigation will be conducted by the insurance investigator and his/her team. Everything is relatively straightforward.
Auto liability claims, however, follow a different procedure in no-fault states.
The No-Fault State Process
In a no-fault state, drivers follow the requirement of carrying personal injury protection and medical payments coverage. Drivers must file claims with their own auto insurance companies to cover certain losses such as lost wages, medical bills, and more regardless of which party caused the collision.
Auto liability claims can still be filed in a no-fault state, but the legal windows allowing someone to do so are limited. Egregious injury-inducing driving behavior that causes severe injuries could establish a legitimate liability claim.
The Collision Option
A driver cannot file an auto liability claim against his own car. He/she can, however, file a collision claim. Valid collision coverage claims pay for damages drivers inflict on their own cars. Not every driver carries collision insurance, though.
Collision insurance falls under the description of an add-on coverage option. Collision insurance is not mandatory, which is why so many drivers don’t carry it.
Depending on the value of the vehicle, paying extra for collision coverage may be worth the nominal investment.
If a driver does damage his/her car, filing a collision claim leads to an investigation and a possible settlement offer for repairs. Be aware some out of pocket expenses come into play as collision insurance requires a deductible payment.
Possible Limitations on Negligence
While auto liability insurance and collision insurance both cover negligence, exclusions may exist.
For example, one insurance provider may cover losses related to driving while intoxicated while another could refuse to cover any losses. Driving while intoxicated might be deemed gross negligence or an intentional act and outside the scope of the policy’s negligence criteria.
Policyholders positively must read their coverage contracts closely and fully understand what their policies do and do not cover. Reviewing several different quotes from a number of different companies further helps the cause of getting the best policy in place.
Coverage Limit Concerns
Auto liability limits refer to the maximum payout on a settlement. Compulsory state minimums are so low only persons with very limited assets may benefit. An individual worth $200,000 who carries only $25,000 in liability coverage must accept financial responsibility for judgments beyond the $25,000.
Procuring $200,000 in coverage might not even enough. A wrongful death suit could lead to a massive judgment. Purchasing $300,000 to $500,000 in coverage might be advisable.
An underinsured driver puts his/her present and future financial well-being at enormous risk. Even going outside the auto policy and acquiring additional umbrella insurance coverage might be the best plan.
Buying auto liability insurance requires careful deliberation. Customers need quality coverage from a reputable provider. Performing necessary research and carefully reviewing quotes support the cause of acquiring solid coverage. Start your research with our free comparison tool below now!