Auto liability insurance helps financially protect you if you’re found at fault in an auto accident. It can help cover an injured person’s medical bills or repairs to someone’s vehicle. Drivers are legally required to carry liability insurance in most states. Liability insurance comes in two forms: and property damage liability coverage. They break down like this:

• Bodily injury liability coverage (sometimes abbreviated as “BI”) – Bodily injury helps pay for an injured person’s medical expenses if you’re found at fault in an accident. It can also help cover legal fees if you’re sued.
• Property damage liability coverage (sometimes abbreviated as “PD”) – This coverage helps pay for repairs if you damage someone’s property. For example, if you rear-end another car, it can help pay for auto shop fees so you’re not stuck with the whole bill.

The amount you pay for liability insurance is based on a number of factors, including how much coverage you purchase. The higher your coverage limit, the more you’ll likely pay for liability insurance. Your insurer can tell you how much your coverage will cost if you adjust your limit. Liability coverage typically doesn’t pay to repair damage to your own car after an accident—collision coverage helps with that. It also doesn’t pay to repair damage caused by other factors, such as hail—that’s where comprehensive coverage comes in.  

Medical payments coverage (MPC) is for the treatment of injuries for you and any passengers in your vehicle at the time of an accident. MPC strictly pays for medical bills resulting from auto accidents; it does not typically pay for things like lost wages. Medical payments coverage may also cover you if you are a pedestrian hit by a motor vehicle. Your medical payments coverage has a limit, which is the highest amount of money the insurance company will pay you for medical costs. This limit is generally a per-person limit. So if you have $5,000 in MPC, that means you have $5,000 in coverage per person in the vehicle. If you are unsure how much medical payments coverage you need, seek advice from a licensed insurance agent.

Contrary to popular belief, this coverage does not automatically cover your rental car if you are on a vacation (although if you have full coverage — comprehensive and collision — your vacation rental vehicle may be covered; check with your provider). Rental car coverage pays for the cost of a rental vehicle while your vehicle is not drivable due to a covered loss. The coverage is usually represented by two numbers separated by a slash. The first number is the daily payment limit and the second is the total limit. So if you see a 30/900 limit, that means your company will pay $30 per day, up to $900 total, for a rental car. Most companies offer a variety of coverage limits so that you can choose the appropriate limit for your needs. For example, suppose you need a vehicle with seating for six people. In that case, you may want to increase your car rental limit so that if your vehicle is not drivable, your insurance coverage will be enough to reimburse you for a larger rental vehicle. It is important to note that many companies have a daily limit on the number of days they will cover the expenses of your rental car to encourage you to purchase a replacement vehicle within a reasonable time frame if your vehicle is totaled.