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In regards to coverage, liability is used to describe third party coverage. When a driver causes an accident, the liability coverage on the policy is used to resolve the claim. It is paid under two coverages: bodily injury and property damage. Both of these coverages have set limits. Bodily injury coverage pays for the reasonable physical injuries sustained in the accident by a third party. It normally involves a lump sum settlement to reimburse the third party for medical bills and to compensate them for pain and suffering. Property damage coverage pays for the vehicle damage of a third party. In this respect, liability is a way to right a wrong between two drivers.
As far as "fault" is concerned, liability is a term used to describe who caused an accident. So, if a driver is considered to be liable, it means he is responsible for causing an accident to happen and bears the burden of restoring the innocent third party. However, before a driver is considered to be at-fault for an accident, there is an investigation completed by an insurance professional. It includes a combined view of police reports, vehicle damages and recorded statements from each driver. The reason why so much work goes into determining it is that a driver's premium rates are affected by it.
In general, when the term liability is used in conjunction with a driver, it means his rates are
about to be hiked up. Drivers who have at-fault accidents are considered to be higher risks and more likely to have another auto accident by insurance companies. As a result, insurance companies feel their premiums must be adjusted to reflect their higher risk. Fortunately, there are checks and balances in force. Drivers who feel they have been unjustly blamed for causing an auto accident can appeal the decision. It usually has to happen within 30 days of the decision and be sent to the insurance company in writing.
A common misconception about liability is that anytime a driver is considered to be at-fault it is based on a police report. This concept is a myth. Insurance professionals understand that police reports can be wrong. As a result, they are only a factor in determine who is liable for an accident. They are not the only determining factor.
The final point about liability is that drivers with auto insurance must always pay attention to how it affects their auto policy. Low liability limits under bodily injury and property damage can leave a driver exposed to losing valuable possessions if he causes a catastrophic accident. Also, the wrong application of liability in regards to fault can cause a driver to mistakenly pay more in premiums. So any driver with an auto insurance policy should always review how liability affects his auto policy just in case he needs to take action to change or refute it.