Car accidents can lead to more than just vehicle repairs and medical bills—they can also result in lawsuits. This is why we recommend carrying high liability limits on your car insurance. Large liability losses are the loss that you can’t afford. If you’re involved in an accident where someone else is injured, they may choose to take legal action against you. This raises an important question: Does your car insurance cover a lawsuit?

Liability Coverage and Lawsuits

The good news car insurance policies include liability coverage, which helps protect you in the event of a lawsuit. Here’s how it works:

• Bodily Injury Liability: If you are found responsible or negligent for an accident that causes injuries to another person, your bodily injury liability coverage helps pay for their medical expenses, lost wages, and even legal fees if they decide to sue.
• Property Damage Liability: If you damage someone’s vehicle, home, or other property, your property damage liability coverage helps pay for repairs or replacement costs, as well as legal expenses if a lawsuit follows.

Each state has minimum liability coverage requirements, but higher limits are often recommended because lawsuits can lead to settlements or judgments that exceed basic coverage amounts. Minimum liability limits are not adequate to cover lawsuits.

What About Legal Fees?

Most car insurance policies include legal defense coverage as part of liability insurance. If you are sued after an accident, your insurance company will typically:

• Hire a lawyer to represent you.
• Cover court costs and legal fees.
• Pay settlements or judgments, up to your policy limits.

However, if the damages exceed your coverage limits, you could be responsible for paying the remaining amount out of pocket. Again, this is why you should protect yourself and your assets with high liability limits. This is where an Umbrella Policy comes into play. An umbrella liability policy helps protect your assets in the event of a large lawsuit. Yes, it does happen.

What If the Other Driver Sues for More Than My Coverage Limits?

If a lawsuit results in damages beyond your insurance limits, you could be personally responsible for the remaining amount. This is why many drivers choose to add umbrella insurance, which provides extra liability protection beyond standard auto insurance limits.

When Does Car Insurance NOT Cover a Lawsuit?

There are certain situations where your car insurance may not cover a lawsuit, including:

• Intentional Acts: If you intentionally cause an accident, your insurance will not cover the damages or legal costs.
• Commercial Use: If you were driving for business purposes (without the proper coverage), your personal auto insurance may not apply.
• Excluded Drivers: If someone not covered under your policy was driving your car, your insurance may not defend the lawsuit.

Protect Yourself with the Right Coverage

To ensure you have enough protection in case of a lawsuit, consider:

• Higher Liability Limits: Increasing your coverage limits reduces the risk of out-of-pocket costs.
• Umbrella Insurance: This provides an extra layer of liability protection beyond your auto policy limits.
• Consulting Your Agent: An insurance expert can help assess your risk and recommend the right coverage levels.

Bottom Line: If you are sued after a car accident, your car insurance policy can help—but only up to your coverage limits. Reviewing your policy and considering additional coverage can help protect your assets and financial future.

Need help reviewing your car insurance coverage? Contact us today (763)767-0522 to make sure you’re fully protected.