It’s easy to miss certain details in your auto insurance policy. After all, there are a lot of different numbers and coverages out there, most of which you probably imagine never having to use. So if you have no clue what liability coverage is, don’t worry. Instead pull up a seat and come to know this essential auto insurance coverage.

Auto insurance liability coverage basically includes coverage for bodily harm and property damage.  You might hate shelling out extra money on your premium, but the fact of the matter is you’ll never know if and when you’ll need it.

One minute, you’re driving to work, running through your day’s checklist – and the next moment, you’re dazed and in shock, having just been involved in a minor road accident. Your mind immediately hypothesizes what would have happened if the accident were more severe, begging the question: if I don’t have liability coverage, what’s to happen to my financial state? The answer, unsurprisingly, is that you’re in trouble – unless of course you have piles of money sitting around.

When you’re involved in an accident that’s your fault, liability coverage will be your ultimate lifesaver. Read on further to learn more about what this basic auto insurance policy covers, and more below.

Bodily Injury Liability

If you ever find yourself in a car accident in which you are the motorist at fault, liability coverage insures the medical and property costs of the other driver and their passengers, according to the  Insurance Information Institute. The advantage of auto insurance liability coverage is that it protects all motorists involved; it saves you from financial ruin, and serves the person’s property and medical costs with whom you injured. In some cases, even the loss of their salary or wages are covered should their injuries prevent them from being able to work. With this coverage, you won’t be in danger of your savings, property and other assets being lost.  

Medical Payments or Personal Injury Protection

This covers the treatment costs of the driver as well as the passengers of the policyholder. If you have Personal Injury Protection (PIP), lost wages are covered, and medical and therapy services provided for you. If you’ve got people counting on you to deliver services, this can also cover the cost of replacing those services. If your work hinges on being able to provide on-time service to your clients, whether you’re a freelancer or an advisor, this coverage will help ensure your clients don’t get short-changed simply because you’re unable to make those deadlines. This can ease your worries about your work deliverables in a big way, helping you to cut back on any of the stress you’d likely feel after the accident.

Property Damage Liability

This usually covers the physical damage you caused to someone else’s car, if you’re the guilty party. However, it also includes the cost of damage to other types of property as well, such as fences, telephone poles, lamp posts, buildings and other structures.

Collision

Collision coverage basically covers the payment to repair or replace your ride after it’s been through an accident. If you’re shopping for a new car and you’re using a loan to finance the purchase, you’ll be required to shell out your hard-earned money for this coverage. So if you’ve got plans to get a new ride, make sure your finances can handle the cost. If not, you could always put that buying decision off for another year or two until you’ve got enough financial resources to take care of any ensuing fees incurred through financing a new or used vehicle.

Uninsured/Underinsured Motorist Coverage

If you or anyone in your family becomes the victim of a hit and run driver or an underinsured driver, this coverage covers your treatment costs. If you get hit while crossing the street, this coverage will also come in handy.

Comprehensive

If your car ever gets stolen or is damaged, be it by fire, water or some teenager thinking it would be funny to graffiti your car – your comprehensive coverage will pick up the tab for replacing your car. This a major benefit. Insurers are also required to replace your vehicle by law if you used a loan to buy your car. Just remember that the higher your deductible is, the more you can save in terms of cost.

However, if your car is already old, it might not be a good idea to have both collision and comprehensive coverage. Review and determine which coverage plan suits your needs better. There are plenty of insurance quote sites, such as CoverHound, that help customers compare auto insurance rates and policy coverages based on your car’s make, model, and age. This will help you to determine which plan is really worth investing in.