Understanding auto insurance is critical. Whether you are buying your first car or renewing your policy, you need this information. What happens if you cause an accident and someone else’s car has damage?

In this case, your liability insurance pays for the losses. It is important to understand how this type of coverage works. That is the best way to safeguard your investment. Take a closer look at what liability insurance can do for you.

It Is a Requirement in Most States

Most states require that drivers maintain liability insurance. They set limits as to the minimum amount you must have to have a valid license and license plates for your car. 

This requirement is usually a very small amount. Most drivers need more than this. However, it provides a very basic level of protection for other drivers you share the road with each day. Remember, liability insurance only covers other drivers. It will not pay for damage to your car.

How Does It Work?

Here is an example. You are driving down the road and hit a patch of ice. The car swerves, and you crash into another car. Your car continues to move forward, and you take out a mailbox.

You pull over and make sure everyone else is safe. Then, you call the police to document what occurred. This scenario can happen to even the most experienced drivers. And, because it can occur to anyone, everyone should maintain liability insurance. Here is how it can help you in this situation.

• It may pay for the damage to the other car. The other vehicle may need repairs after you hit it. Your policy covers those losses up to the maximum amount of coverage you have.
• It may pay for damage to the driver or passengers in the other car. This includes medical bills, lost time at work and even pain and suffering.
• It covers the damage you cause to another person’s property, too. In this case, it may help cover the mailbox you hit.
• The policy covers any lawsuits you face, up to the amount of the policy. Your insurance company may try to settle the claim with the other driver, for example.
• If you do go to court, your policy also provides coverage from a defense attorney for you.

As you can see, liability insurance is a powerful component of your auto insurance coverage. Be sure your car insurance offers enough of it.