Auto Liability Coverage Explained

Let’s have a chat about automobile liability insurance. Your auto policy has a lot of moving parts, and it’s important that you understand them.

Florida’s a pretty odd state in that, presently, we only require property damage and what we call PIP, or Personal Injury Protection, to be legal on the road.

It’s hardly any coverage, and if you’re in an accident, you’re likely going to wind up with a court-ordered requirement to buy a lot more insurance than that moving forward if anybody gets hurt. Or worst case, you’ll have liens and judgments or even wage garnishments that are levied against you by a court because you are underinsured or not insured at all.
So let’s talk about auto liability coverage.

What does auto liability coverage actually cover?

One of the most important things when it comes to Florida auto insurance is understanding that the State minimums—property damage and PIP—are not enough insurance.

They’re simply not.

You’re required to have $10,000 worth of property damage coverage. So if you cause property damage to a third-party, you’re only required to have $10,000 that would pay out to them and prevent them coming at you directly.

So let’s say you were on the road in front of your office and turning in to go to a hard day’s work and an accident occurred and the police said you were at fault. The thing is, the person that you hit is okay, but their car—a brand-new Toyota Corolla—is totaled.

That new Toyota Corolla, easily, in its first year of driving is worth more than $10,000. So your insurance (at that State minimum limit) would pay out $10,000 and leave you to pay the rest. That’s where the court judgments come into play and wage garnishments could be levied against you.

With so many options and prices, how do you choose?

The lesson there is: you need to buy an amount of insurance that’s commensurate with what your real risk is.

The truth is, even the next-highest limit with most Florida insurers, which is $25,000 of property damage, really isn’t enough.

We recommend no less than $100,000 in property damage coverage and we’re happy to show people day-in and day-out how the difference sometimes between that $10,000 and $100,000 can literally be as little as $20-25…a year.

That’s something like $2 a month.

It’s just not a very expensive coverage and it’s critically important.

What is Bodily Injury Liability?

Then we’ll move on to bodily injury liability. That’s if you hurt somebody in an accident that you’re at fault in. It pays to a third party that’s injured when you cause the accident.

The same situation applies where the more you can afford, the better. Otherwise, should somebody be severely injured (or the worst is to happen), you definitely can wind up with a series of court judgments and wage garnishments and really have a financial problem caused by it.

This would have all been avoidable had you purchased sufficient insurance limits. (At least, in theory.)

Is Auto Liability Coverage the Only Coverage You Need?

Let’s take a closer look at bodily injury liability insurance, arguably one of the most important coverages on your auto policy. 

When most people mention “auto liability,” this is usually what they mean.

Bodily injury liability is a third-party coverage. It doesn’t pay for your injuries or damage to your car. Instead, it covers injuries you cause to someone else when you’re at fault in an accident.

These limits are usually structured as what’s called a split limit. For example, your policy might show limits of $100,000 / $300,000. That means the insurer would pay up to $100,000 per injured person, and up to $300,000 total per accident, regardless of how many people were involved.

So if three people are injured and each requires $100,000 in care, the full $300,000 would be paid out. If their injuries were less severe, say $30,000 each, the total payout would be $90,000.

That’s just one way this coverage can be set up. There’s another option worth understanding, too.

What’s The Difference Between Split Limits and Combined Single Limits?

Most Florida auto policies use a split limit setup like we just described, separate caps per person and per accident. But some insurers also offer a Combined Single Limit (CSL) option.

With a combined single limit, there’s just one total dollar amount available per accident, let’s say $300,000, that can be applied however it’s needed. 

There are no individual caps per person. That means if one person needs the full amount to cover severe injuries, it’s available to them.

This structure offers more flexibility in how the coverage is used, which can be especially helpful if one party is significantly more injured than the others. 

In fact, CSL coverage is sometimes less expensive than split limits, even though it offers more flexibility in how claims are paid.

If you’re unsure which option makes the most sense for you, or whether CSL is even available on your policy, it’s a great topic to bring up with your insurance agent. 

We’re always happy to walk you through the differences and help you find the best fit.

Do you really need auto liability coverage?

So why do you need liability insurance coverage on your automobile?

Well, it’s really pretty simple. You want to not have to pay out-of-pocket for people’s injuries and you want to not have to risk wage garnishments that will stay with you into the future.

A lot of people misunderstand and think, “Well, I’m early on in my career. I’m young. I don’t have much money in the bank. What do I have to risk?” The answer to that question is: Your entire future.

If you were to receive a wage garnishment because someone gets a $500,000 judgment against you, your employer is going to be required by the State to withhold a portion of your wages until that $500,000 is paid.

That could never happen, it could take 20 years to happen, it could take 10 years to happen. But what it does is stay with you into the long-term future, so any earning potential that you may have 5, 10, or even 15 years from now is still affected.

Your current position isn’t everything that needs to be considered.

Does liability insurance cover me or someone else’s car?

A very common misconception about automobile liability insurance is how it covers another person’s car or your car.

In short, liability insurance—in the form of property damage liability—would cover if you damage another person’s vehicle. That’s a very, very important coverage. There is, however, no coverage under the liability section in Florida that would cover your car.

Some states do have what’s called “un- or underinsured motorist property damage coverage,” so if somebody doesn’t have enough of their own property damage coverage and they’re at-fault and hurt or damage your car, then you can collect against your own policy. That coverage line does not exist in the State of Florida.

We do, however, have Uninsured Motorist Bodily Injury Liability coverage here in the State of Florida, which we’ll cover in a different episode.

Conclusion

So to wrap it up, simply put, automobile liability insurance has a lot of moving parts. It’s important to realize that the state minimum here in Florida (in most states, really) isn’t adequate coverage for most people. It’s just meeting what the State calls a “financial responsibility minimum” so that you can be legal on the road.

Automobile liability insurance is there to protect you and your future earning potential, so that an accident doesn’t stymie you for the next 10 or 20 years.

Stay tuned for our next couple of episodes, where you’ll continue to learn about some awesome tips and tricks about all kinds of insurance.
And don’t forget to click “Subscribe” to the Harry Levine Insurance YouTube channel. You never know what exciting content’s gonna come up next. And I promise we’re not just gonna bore you with insurance stuff. There’ll be some fun times ahead.

Thanks a lot, guys.