Liability insurance protects a driver financially if he or she is found legally responsible for causing injury to another person or their property.
There are two categories of damages that liability insurance covers - bodily injury liability (BI) and property damage liability (PD). Liability insurance also provides the insured person a legal defense against a lawsuit alleging bodily injury or property damage from an accident.
Bodily injury liability - Covers damages due to injury sustained by someone that the insured person is legally obligated to pay. These damages can include medical expenses, lost wages and legal fees, as well as pain and suffering.
Property damage liability - Covers damages the insured person is legally obligated to pay, including repairing the other party’s vehicle and other property damage to objects such as buildings, fences and signal lights.
Liability coverage limits are generally written as three numbers - such as $25,000/50,000/15,000. The first figure is the maximum amount the company will pay for a single injury at $25,000; the second figure is the maximum amount the company will pay per accident for all injuries at $50,000; and the third figure is the maximum amount the company will pay per accident in property damage at $15,000. Damages from even a low impact collision can easily exceed mandatory liability auto insurance limits, so be sure to discuss what limits make sense for you with your Mercury agent.
The Insurance Information Institute suggests that drivers carry liability coverage that is no less than $100,000/300,000/50,000. Other insurance industry experts also recommend buying a minimum of $50,000 in property damage liability coverage. If the net worth of the person at fault is considerably more than the mandatory minimums, they can be held personally responsible for amounts above what the insurance policy covers.