Let’s break down what this type of insurance covers and why it’s important.
Dave Ramsey’s car insurance advice
Liability coverage is essential because it covers the third-party costs of a car accident if you’re determined to be at fault. This includes medical or car repair costs that you’re responsible for as a result of the accident.
In states with
no-fault laws, drivers don’t need to have bodily injury liability coverage on their policy—but that doesn’t mean you shouldn’t get it. Personal finance expert
Dave Ramseysaid it’s a good idea to have a lot of liability coverage. He recommends getting at least $500,000 worth of coverage that includes property damage liability and bodily injury liability.
Property damage liability covers the costs of getting the other driver’s car fixed. Bodily injury liability covers costs related to the other driver’s lost wages or medical bills.
If you don’t have enough liability coverage and you’re at fault in an accident, you may find yourself in some serious financial trouble. In this case, you’d be responsible for paying the other driver’s costs out of pocket.
Get liability coverage that you can afford
Before increasing your liability coverage, you’ll want to consider what you can afford. When you raise your liability coverage, your car insurance premiums will also increase.
Still, in the long run, paying a little bit more each month could save you money. Ask yourself if you were at fault in an accident today, if you’d be able to cover the other driver’s damages out of pocket. If not, it might be a good idea to raise your liability coverage.
While liability insurance pays for the medical and property costs for other drivers in an accident, it doesn’t cover your own injuries or vehicle. So it’s also important to consider your coverage and if you’d be able to cover those costs as well.
Take a look at what your state requires, as well as what you can afford each month to help decide how much liability coverage to get.
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