Automobile liability insurance policies assume the risk of financial loss arising from liability for bodily injury or property damage to third parties caused by automobile accidents. Such policies are available not only to car owners and operators, but also to garage and service-station operators and others concerned with the repair, storage, or sale of motor vehicles.
Financial-responsibility laws exist in almost every state in the U.S. and require car owners who have been involved in vehicular accidents or are guilty of certain offenses to obtain automobile liability insurance of a specified minimum amount before they are licensed to drive a car again. In addition, about half of the states have compulsory automobile liability insurance laws that require all car owners to obtain automobile liability insurance before they register their cars, thus assuring that innocent victims of automobile accidents will be compensated for personal injury and property damage.
Automobile liability policies provide coverage for damages arising from bodily injury, sickness, disease, or death resulting from automobile accidents. The basic limits are as low as $10,000 for injury to one person and $20,000 for injury to two or more persons involved in one accident, although many states require higher limits. Coverage is provided also for liability from damage to or destruction of property, including the loss of use. The basic limit is at least $5000. Limits of liability in excess of the basic limits for personal injury and property damage can be purchased for an additional charge.
An increasing number of states are passing no-fault automobile insurance laws, under which the injured party is paid for medical expenses and lost wages regardless of who caused the accident. Thus, within the limits of such policies, the concept of liability insurance is replaced. Many such laws permit the injured party to sue for loss if it exceeds the threshold specified by law (for example, if it is a “serious” injury).
Source:Encarta
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