Liability insurance pays damages to other people and their property caused by the negligence of an insured person. There are many types of auto insurance liabilities.
Three types are included in a standard policy:
The traditional liability plan covers the costs of at-fault accidents, referred to as a 'First Party' policy.
Additionally, some states have a ''No Fault" liability system for smaller claims. With this type of arrangement, the auto owner buys insurance, has a fender bender, and then collects under his own policy. The system is based on lowering claims costs by avoiding the determination of liability.
A no-fault system differs from a state plan. A state plan is an insurer of last resort, which means if the driver cannot find insurance in the standard market, the state will issue a policy. Commercial insurers participate in the profits and losses of the assigned risk pool.
Medical payments coverage is not liability coverage. Medical payments coverage reimburses, as an accommodation, small medical amounts for injuries involving an insured vehicle. This coverage would include incidents such as fingers pinched by a door as well as the result of an accident.
Although the various types of auto liability insurance can be confusing, the simple reason it exists is to protect your assets when you are liable in an accident.
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