When you purchase car insurance in most states, you are required to buy liability protection. This liability coverage is designed to protect you from large out-of-pocket losses if you are sued for an accident that you cause. Your liability protection includes the payment of your legal fees. This means that if you have liability insurance, the insurance company will generally defend you in a court of law and pay for the costs associated with your defense. However, there may be some limitations.
How does liability insurance coverage work?
When you purchase liability insurance coverage, the insurer essentially agrees to limit your financial losses if you get into an accident and are sued. But the insurer will only assume the risk up to the limits of your policy. In other words, the amount of coverage you buy determines the amount of coverage you are going to receive.
If I’m required to buy liability insurance, how do I determine the amount of coverage I need?
States typically set a minimum coverage amount required for liability insurance. That minimum is expressed in a three-digit ratio. For example, your state may require you to buy 25/50/10. This would mean you would be covered for $25,000 of damage you cause to one individual and up to $50,000 in total liability for a single accident. The third number refers to property damage liability.
Will the insurance company defend me in court?
If you are sued, the insurance company agrees to "stand in your shoes" and defend you. The company will also pay your damages up to the limit specified by your policy. If the damage award in court exceeds the coverage you have, the insurance company will leave you on your own to pay the difference.
How much control will I have over my defense?
Because the insurance company has a large amount of money at stake in the event of a car accident lawsuit, the insurer has a great deal of control over the defense you build. The company may have the authority to make a settlement offer outside of court, and if they do, you'll generally have to live with the results. Your insurance contract may also have a cooperation clause stipulating that the insurer can void coverage if you do not cooperate in the defense of any lawsuit.
Should I get additional help?
Don't assume that because the insurance company is paying your legal bills that they are always on your side. You should strongly consider getting a lawyer in any car accident case to make sure your interests are protected.