In most parts of the United States, auto insurance coverage is a legal requirement. State lawmakers determine the minimum level of coverage that drivers must have in place to stay legal. Third party liability coverage, which includes bodily injury and property damage protection, is usually mandatory in states requiring consumers to have a certain level of coverage in place.
Liability insurance protects the policyholder from having to pay for claims made by the occupants of the other vehicle when an accident occurs. It includes claims for medical bill, rehabilitation costs and lost wages incurred as a result of the incident. It pays a specific amount as a funeral benefit if the accident was a fatal one.
The bodily injury liability part of the policy has two numbers: the first one refers to the level of coverage to pay for a single accident victim’s injuries and damages and the second one indicates the amount of protection in place to pay for damages claimed by two or more accident victims.
The property damage liability portion of the policy looks after the cost of repairs to the other driver’s vehicle. If the other vehicle was totaled in the accident, the property damage coverage pays out based on its cash value. This part of the policy pays for the cost to repair other items which were damaged in the accident, including structures like buildings and sheds, as well as fences, guard rails, sign posts, light stands, mail boxes and fire hydrants.