Two Differences Between Legal And Contractual Liability In Car Insurance

Purchasing car insurance can be a daunting task, especially when it concerns hashing out just what kinds of accidents and mishaps for which your contract will hold you liable. With pages upon pages of legal documentation to sort through, web sites with conflicting information, and friends and family members who strongly recommend exactly opposite solutions, it’s hard to know which policy choice is the right one for you.

The solution is self-education. To pick a policy that affords you the best options in liability insurance, you first need to understand the difference between contractual liability and legal liability.

Legal liability is a burden issued by the state in which you live (assuming you live in the United States – laws vary by nation). This comes to bear any time you are operating a vehicle which does some physical damage to a building or piece of property, or does bodily damage to another person as a result of the accident. The repercussions of these sometimes-tragic events are determined by a court of law, and compensation to the injured party, or parties, is awarded in the form of “damages.” In lower-level courts, like simple traffic court, for example, these damages are determined and awarded solely by a judge. In higher courts, where perhaps a law suit and a series of appeals has lead the state’s higher courts to hear the case, a jury of peers might decide what damages to award in what is usually referred to as a “civil suit.”

Contractual liability is far different from that of legal liability. Where legal liability lies in the jurisdiction of the court and can often vary in application given mitigating or aggravating circumstances, liability of a contractual nature is a binding legal agreement between you and your insurance company. This agreement, once any damages are awarded by a judge or jury, in the case that property or bodily damage occurs in an accident, determines just what proportion or percentage of those damages you are liable for, and what percentage your insurance company must pay for you. This agreement also determines what kinds of damages will be covered and which will not, including damage done to your own vehicle. This coverage typically becomes more comprehensive the higher the cost of the insurance.

As an example, most car insurance policies of a basic level will cover damage done to your vehicle by a car thief. They will not, however, cover tornados, floods, or other “acts of God,” unless you pay extra.

In short, liability is a nebulous topic which is best understood by the courts, lawyers, and judges. For more information, do some quick online research and you’ll be sure to find what you’re looking for.

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