Liability
Legal responsibility for causing harm, injury, or damage to another person or their property. In insurance, liability coverage pays for the costs you owe to others when you are found at fault.
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Example
“When I rear-ended another car at a stoplight, my liability coverage paid for the other drivers vehicle repairs and medical expenses.”
Memory Tip
Liability means you are LIABLE. Legally on the hook for the damage you caused.
Why It Matters
Without adequate liability insurance, a lawsuit could force you to pay damages out of your savings or home equity.
Common Misconception
State minimum liability coverage is often far too low to cover a serious accident.
In Practice
Most advisors recommend at least $100,000 per person and $300,000 per accident in liability coverage.
Etymology
From French liable, meaning bound or obligated.
Common Misspellings
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