Question

Suppose a car insurance company sells you an insurance policy that “gets you legal” and costs $7.50 per month. What is the problem with this insurance policy?

What does it mean to have only 25/50/25 liability coverage for the following situations (what could the insurance company pay)?

a. If you hit someone (you are at fault)?

b. If someone hits you (they are at fault) and is insured?

c. If someone hits you (they are at fault) and is not insured?

d. If it is ruled that neither person is at fault?

Answer 1

Bodily injury liability coverage pays for others’ injuries or death in accidents where you are at fault. This covers the driver and passengers in another car, as well as any motorcyclist, bicyclist or pedestrian you harmed with your vehicle. Car insurance policy terms differ, but in general, BI covers up to your limits, for the following:

• Medical expenses of an injured party
• Funeral expenses of a fatality
• Loss of income
• Pain and suffering

Property damage liability insurance covers damage to another person’s property from accidents that are your fault. Below are a few examples of property that could potentially be damaged:

• Vehicles
• Fence
• Building
• Fire hydrant
• Guardrail
• Pole
• Landscaping

Liability also covers legal defence in the event that you’re sued because of an auto accident.

The first number on your car insurance policy represents the “bodily injury per person” that your carrier will pay out if you are in an at-fault accident. Therefore, if you own a 25/50/25 policy the “25” means that your carrier will pay out up to $25,000 for each person injured in an accident that was your fault. Anything above $25K in this example -- comes out of your pocket.

The second number refers to the total “bodily injury per accident,” meaning the most your policy will pay out in the case of an at-fault accident. According to the first number, 25, the policy will pay up to $25,000 for each person hurt in an at-risk accident. The second number, in this case, 50, means $50000 and this is your maximum coverage for bodily injury liability for all persons injured in one accident.

The last figure signifies the amount of property damage your policy will pay out. The 25/50/25 policy-holder is covered up to $25,000 for damaged property in an at-fault accident.

Accordingly, your questions can be answered as follows:

1) in first case since the accident happened because of your fault, your insurance company will pay for their injuries (the person who got injured because of you) upto $ 25000 per person bodily injured with a cap of $50000 collectively. Also, upto $ 25000 would be paid by the insurance company for any other person's property that got damaged because of you.

2) In the second case i.e., if the accident takes because of another person's default and that person, is insured then you will get paid upto $ 25000 per person bodily injured with a cap of $50000 collectively. Also, upto $ 25000 would be paid by the insurance company for your property that got damaged because of the accident.

3) In third case i.e. if some hits you and that person is not insured then there would be no insurance claim available to you.

4) In fourth case i.e. when none of the persons is at fault, the insurance company would not compensate you or the other party for any damage caused.