Liability Insurance

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Liability insurance covers you if you do something that causes either harm to another person or damage to another person's property. For most private individuals this usually means automobile insurance. If you rear-end another car because you are not paying attention, it is probably your fault, and you would almost certainly be liable for the damage you caused to the other driver's car. In most states auto liability insurance is mandatory, which means you have to buy it. Drivers are required to be insured for certain minimum limits of liability insurance. These limits are usually expressed with three numbers, for example, $20,000/$40,000/$10,000. The first number is the limit of insurance required to compensate any one person involved in an accident; the second number is the total limit that is required to compensate all persons injured in an accident; and the third number is the amount required to pay for any property damage arising from the accident. Liability insurance can also include medical payments insurance and uninsured/underinsured motorists insurance. You can also be liable as a homeowner if a tile falls off your roof and hits someone on the head. Your homeowners insurance policy should cover your liability in this case. The full term for liability is third-party liability. The first party is you, the policyholder; the second party is your insurance company; and the third party is anyone else who might be involved in an accident with you. You can see how much liability insurance is provided in an insurance policy by reading the declaration page.