Please note this is only an informational post and is specific to the state of Arizona. It is important to always read your own policy. You can find your policy coverages on your Declarations Page or Evidence of Insurance. If you have any questions, you should contact your insurance agent.

Auto liability coverage is one of the fundamental coverages on an auto policy. It’s essential for two main reasons: the State of Arizona requires that all motor vehicles driven on roads in the state have liability coverage, and it helps protect your assets by covering the costs of your responsibility in an accident, preventing you from having to pay out of pocket for damages and/or injuries.

 52% of US drivers who were recently surveyed thought that their auto liability coverage would cover their medical expenses in the event of an auto accident.

Auto liability coverage is the coverage on your auto policy that protects you financially (up to your policy limits) if you are found to be at fault for an auto accident that caused injuries or property damage to others.

There are two parts to auto liability coverage in Arizona: bodily injury liability and property damage liability. When you purchase your auto policy, you will choose the limits listed on your policy.

For an in-depth explanation of auto liability and other auto insurance coverages, please read my post Auto Insurance 101: The Basics

The Accident

Mr. and Mrs. Smith planned a birthday celebration for their daughter, Alice Smith, at their family’s favorite restaurant. When the Smith Family was driving to the restaurant, Noah Miller, who was running late for a date, ran a red light and hit the Smith Family head-on.

Injuries

Property Damage

This example may seem far-fetched, but it happens every day. On average, 155 people are injured and 3.5 people die on Arizona’s roads every day. There are, on average, 305 auto accidents every day in the state of Arizona.

Noah Miller has state minimum for his bodily injury liability coverage limits, $25,000 per person and $50,000 per accident. The State of Arizona’s minimum coverage required for drivers has some of the lowest required coverage amounts in the United States.

Alice Smith’s medical bills were under Noah Miller’s liability coverage limit ($25,000 per person)

Mr. Smith’s medical bills exceeded Noah’s liability coverage amount of $25,000 (Medical Bills $100,000 – Insurance Covered Amount $25,000 = Amount Noah would be liable for $75,000)

The most that Noah Miller’s bodily injury liability coverage would cover is $50,000. After covering Alice Smith and Mr. Smith’s medical bills, the remaining amount that is left for Mrs. Smith’s medical bills is $5,000.

$50,000 (maximum amount per accident) – $20,000 (Alice Smith) = $30,000

$30,000 – $25,000 (Mr. Smith – there is a remaining amount of $30,000 left but the maximum that Noah Miller’s liability coverage will cover per person is $25,000) = $5,000 (Mrs. Smith)

With state minimum liability, Noah Miller’s property damage liability coverage limit is $15,000 per accident.

Noah Miller’s liability coverage would not cover anything for his vehicle. If he had collision coverage on his auto policy then his vehicle repairs would be covered for a reasonable amount minus his deductible.

Total Amount Noah Miller Could be Liable for

The total amount that Noah would be liable for is $255,000. I cannot stress this enough, your liability coverage does not apply to your medical bills or your property damage.

Noah Miller and the Smith Family were unable to negotiate a settlement for the $255,000 that was not covered by Noah Miller’s insurance. The Smith Family filed a lawsuit against Noah Miller. There was a judgement issued and Noah Miller was legally obligated to pay the Smith Family $255,000.

Noah Miller didn’t have enough money to pay the Smith Family and instead contacting his lawyer to see what his options were, he decided to not pay.

Because Noah Miller did not pay the Smith Family after the court ruled that he was required to pay, the Smith Family was forced to take legal action to collect the amount due.

The result of Noah Miller not paying the required amount or working with his wages were garnished and his driver’s licensed was suspended until the Smith Family was paid in full.

Assets At Risk For Failure to Pay After a Judgement

• Real Estate: your home may have some protection from the homestead exemption but it depends on the situation
• Bank Accounts: funds in your bank account may be levied to collect on a judgement
• Vehicle: Your car can be seized and sold to satisfy the judgement if you do not have any other assets to cover the amount owed
• Wages: A portion of your paycheck can be garnished to pay off the judgement
• License: Your license could be suspended until the amount due is paid

Request A Specific Topic

Conclusion

How can you make sure you don’t end up like Noah Miller? Contact your insurance agent and request a policy review. It is important to review your policy at least once a year, the best time is about a month before your policy is set to renew.

An Umbrella policy is also a great way to make sure you have proper coverage and in the event you are found to be at fault for an auto accident you will never be in Noah Miller’s shoes!

The information contained in this blog post is provided for general informational purposes only. The information is produced from my own personal experiences and personal research. While my main goal is to keep the information up to date and correct, I make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability concerning this blog post or the information, products, services or related graphics if any contained in this blog post for any purpose. The information is not meant as professional or expert advice, and any reliance you place on such information is therefore strictly at your own risk.