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Understanding Liability Insurance: One sunny afternoon, you are driving your car. You come to a stoplight. As it goes from yellow to red, you slow and stop. You hear a screech, then you notice your car has been pushed forward. When you get out, you see a truck slammed into your car. Your trunk is bent up, and your bumper is on the ground. The truck driver asks, “Why did you stop?” “The light was red,” you say. He shrugs, and you both exchange your names, numbers, and insurance information.

Car insurance is the most prevalent type of liability insurance. It does not protect you from a loss or injury to yourself. It protects you from a lawsuit that a person may bring against you. In this case, liability insurance will protect the truck driver if you file a suit against him. The insurance company will hire an attorney to represent him, and if you settle, it will pay that. It will also pay a judgment you may obtain, up to the policy limits.

This is where most people get confused. When they have a claim, it is usually against someone else, but they end up dealing with an insurance company. Thus, the day after you left the scene of the wreck, you will most certainly be dealing with the insurance company and not the truck driver. When the insurance company is not fair to you, you will

probably want to sue the insurance company. But that’s rarely possible under the law. Most states require you to bring suit against the driver who caused the wreck. This may be a bit confusing. After the wreck, the insurance company is deciding what to pay, and whether they will pay anything. The insurance company often directs much of what the other driver’s lawyers will do. Nevertheless, the case you have is against the other driver, not the insurance company. Consider what the liability insurance is for. It’s a contract between the driver and the insurance company. The driver paid for the insurance company to defend him and pay others for damages if he owes it.

Car insurance may have other components (See our Step by Step Guide to Car Insurance), but car insurance is the most frequent type of liability policy, and that portion of the policy is usually what most of your premium goes to. Besides car insurance, there are many other types of liability policies. Doctors usually carry medical mal-practice insurance that protects them from lawsuits brought by patients or others they may injure. Stores and shops often carry liability policies to protect them from lawsuits brought by patrons injured on their premises. Many homeowner’s policies carry a component of liability insurance.

Regardless of the form of liability insurance, its purpose is to protect the person that caused injury, not the injured. This leads to a problem when a driver causes an accident and his passengers are hurt.