Auto Insurance

Question 8 • 26-27 Ignite Financial Literacy Personal Finance - EL3403

What is the basic difference between liability insurance and collision insurance?

Answer

Liability insurance covers only medical injuries, and collision insurance covers only property damage.

Liability insurance covers damage that you cause, and collision insurance covers damage done to your vehicle.

Liability insurance is optional, but most states require collision insurance.

Liability insurance protects against theft or vandalism, and collision insurance covers against accidents or crashes.

Explanation

Liability insurance generally pays for injuries or property damage you cause to other people. Collision insurance helps pay to repair or replace your own vehicle when it is damaged in a crash. Therefore, choice B correctly describes the basic difference.

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