Liability auto insurance coverage is put in place to pay for damages that a policyholder causes in an at-fault accident. Rather than paying for the policyholder’s own claims, it covers the cost medical bills, rehabilitation expenses and lost wages. Depending on the state, a person who has been injured in an accident may also have the right to sue for compensation for his or her pain and suffering.
It is an important part of an overall financial plan, and having enough liability coverage in place is key to protecting the policyholder’s hard-earned assets. Without this type of protection in place, the at-fault driver in an accident will have to pay for these costs personally. Very few people have funds readily available to pay out several thousand dollars in damages if an accident occurs. Rather than having to consider selling off assets and withdrawing funds out of a bank account to pay these obligations, a much better choice for drivers is to buy a policy with a coverage limit which is high enough to cover the damages which could result from a serious accident.
A driver who cannot produce proof of insurance when stopped by police or at the scene of an accident will be liable for penalties which may include a fine, license and/or registration suspension and more. A lapse in liability insurance coverage can also make it more challenging to get coverage, since this incident will put him or her into a high-risk category.