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What does auto liability insurance cover?

Perhaps the most important type of auto insurance to have is liability coverage. According to "Get a Financial Life" (Simon & Schuster), "If you cause an accident with your car and injure someone or damage something, auto liability insurance will pay the injured person's medical and repair expenses. Auto liability, which is technically known as 'bodily injury liability' and 'property damage liability,' will protect you in case you are held responsible for an accident."

It's not unusual for liability protection to account for more than half of an insurance policy's cost. Without adequate protection, you could easily lose everything you own (and possibly even a large amount of your future earnings) if you come out on the losing end of a major lawsuit.