This article briefly explains the ins and outs of bodily injury liability insurance. Remember that liability insurance does not cover your own injuries – it is designed to cover your legal liability for injuries that were inflicted on someone else in a traffic accident that was at least partly your fault. Although other forms of insurance are available to cover your own injuries, they are beyond the scope of this article.
State Mandatory Minimum Coverage Limits
Except for the dozen or so states that apply “no-fault” principles and require their motorists to purchase Personal Injury Protection (PIP) insurance, every state applies minimum auto liability coverage requirements, although a few states provide certain loopholes. Two types of minimum coverage requirements apply: per person and per accident coverage.
Minimum Coverage Per Person: States require their motorists to purchase auto liability insurance that cover a certain amount of personal injury liability – $30,000 per injury, for example. These requirements cover any amount that a court may award a claimant for personal injury, including non-economic damages. Typically, however, there is no need to file a lawsuit, since insurance companies generally settle claims out of court.
Minimum Coverage Per Accident: The “per accident” requirement covers cumulative personal injury damages per accident. If the coverage limit is $30,000 per victim and $60,000 per accident, for example, three victims of the same accident couldn’t successfully claim $30,000 each – the payout would have to be apportioned among the victims.
Penalties for Driving without Auto Liability Insurance
The penalties for driving without insurance vary by state. Depending on the state, possible penalties include some (but not all) of the following penalties.
- Suspension of your driver’s license (most states)
- Suspension of registration (so no one can drive your car)
- Jail time (in a few states)
- Impoundment of your vehicle
- A fine of several hundred dollars
- Community service (in a few states)
An unofficial penalty will apply if you are in an accident that is your fault and you are sued for damages – since you lack liability insurance, the victim’s damages will have to come out of your pocket.
Economic damages include compensation for the following losses:
- Past, present and estimated future medical bills.
- Lost earnings, including both time off due to injury and lesser earning capacity due to long-term disability.
- Incidental expenses such as child care while the victim is hospitalized or incapacitated, travel expenses to and from health care providers, etc.
- Legal expenses such as attorney’s fees. While plaintiffs commonly request this. U.S. courts generally don’t award them.
Non-economic damages represent compensation for psychological harm, such as:
- Pain and suffering: This is awarded in compensation for physical suffering such as physical pain or respiratory distress.
- Mental anguish: “Mental anguish” generally refers to distress caused by the loss of the ability to perform every day activities, such as exercise and sex, due to personal injury.
It is common for the recovery for the non-economic component of a personal injury claim to far exceed the recovery for economic damages.
When in doubt, have a lawyer look over your auto liability insurance policy before you purchase it to find out where the loopholes are. If an accident occurs and you believe that your insurance company is unfairly denying coverage, a lawyer might prove useful to exert pressure on them or even file a lawsuit.