While most states in America require drivers to carry liability insurance on their vehicles, the required minimum varies widely between states. Even if you obey the law and purchase the amount of insurance your home state requires, you may discover that you are under-insured if you are responsible for an accident. If your auto policy does not provide sufficient liability coverage, your homeowners policy will provide no remedy.
In general, car insurance includes at least two different kinds of liability protection that will protect you from financial loss if you or someone you’ve given permission to drive your car is responsible for an accident. Bodily injury liability coverage pays for the medical expenses incurred by a third party injured in an accident you caused, while property damage liability protection pays to repair or replace the objects or structures damaged or ruined as a result of the accident.
Other types of coverage that may be included in your car insurance policy are personal injury protection, uninsured and under-insured motorist, collision and comprehensive protection.
Like your car insurance, your homeowners policy includes liability protection for you and your family members who live with you. The liability coverage in your homeowners contract will pay the medical expenses for people who are injured on your property and the repair or replacement costs for a third party’s physical property that is damaged by you, your family members or your pets.
Typical homeowners insurance policies include additional coverage for the structure of your home and the other buildings on your property, your personal belongings and the living expenses you incur if your residence becomes uninhabitable for a period of time.
Your automobile insurance and homeowners insurance policies both include limits on how much your insurer will pay for bodily injuries and property damage. Each state that requires drivers to carry liability coverage on their vehicles has its own required minimum amount of coverage that drivers must purchase. A typical homeowners policy has a limit of between $100,000 and $300,000 of liability protection. Once the liability protection thresholds identified in your policies are met, you are responsible for the excess of the claims made against you.
Depending on your insurer, you may be able to increase the amounts of liability protection that your car insurance and homeowners policies provide in exchange for higher premiums. Regardless of the amount of coverage your respective polices include, your homeowners policy will not pay the costs that exceed the liability limits in your auto policy, and your car insurance will not pay the overages of claims filed against your homeowners policy.
If you want additional liability protection, you can purchase an umbrella insurance policy that will cover the expenses that exceed the liability limits of your car and homeowners policies up to the limit of your umbrella policy contract. The Insurance Information Institute estimates that you can purchase a $1 million umbrella policy for as little as between $150 and $300 per year.
- Insurance Information Institute: Should I Buy an Insurance Liability Policy?
- Insurance Information Institute: What Coverage Is Included in a Standard Homeowners Insurance Policy?
- Insurance Information Institute: What Is Covered by a Basic Auto Insurance Policy?
- Car Insurance Comparison: Can You Go After Someone's Homeowners Insurance Involving a Car Accident?
- Travelers: Umbrella Coverage Basics
- CarInsurance.com: What Does Auto Insurance Cover?
- Online Auto Insurance: What Does Auto Insurance Cover?
- David De Lossy/Photodisc/Getty Images
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- New York State No-Fault Car Insurance Rules
- Liability Requirements of Financing a Car