How much does liability car insurance cost?

You need enough liability insurance to cover your net worth. Having coverage equal to the value of the assets you own and all the money you have, minus your debt, protects you financially in case of a serious car accident.

When to Carry Only the Minimum Liability Coverage

Although almost every state requires drivers to carry liability insurance, the minimum coverage is not always enough to cover the cost of an accident. It’s always best to carry as much liability coverage as you can afford, especially if you have a high net worth. You can generally get away with a lower property damage liability limit if you want to save, however, since property damage liability claims are usually less expensive than bodily injury liability claims.… read full answer

If you don’t have many assets or think the risk is worth it, you might be comfortable with carrying only the minimum coverage. But no matter what, make sure you’re carrying enough insurance to comply with state law and avoid paying fines for driving uninsured.

Liability Limits on Auto Insurance

Liability limits on auto insurance are the maximum amount that your insurance company will pay for injuries and property damage in accidents that you cause. Liability limits are typically written as three numbers divided by slashes.

For example, Arizona’s liability coverage requirements are 50/30/10. That means drivers need to carry $50,000 in bodily injury liability coverage per person, $30,000 in bodily injury liability coverage per accident, and $10,000 in property damage liability coverage overall.

Why You Need More Liability Insurance Than the State Minimum

Your insurance company will never pay for anything beyond the limits of your policy. Using the Arizona example, if you cause an accident that leads to $70,000 in medical bills for the other driver, you will have to pay for $40,000 if you are only carrying the minimum insurance required. And if you can’t afford to pay the full amount, the other driver can sue, and you can have your assets seized or wages garnished to cover the remainder.

Third-party liability insurance is insurance that pays when the policyholder injures another person or causes damage to another person’s property. In car insurance, third-party liability insurance is required in almost every state, and it only applies when the policyholder causes an accident. Third-party liability insurance does not pay for the policyholder’s own injuries or property damage.… read full answer

The Parties in Third-Party Liability Insurance

In third-party liability insurance, the first party is the policyholder and the second party is the insurance company. The third party is anyone else who becomes involved. Since liability means legal responsibility, third-party liability refers to the policyholder’s legal responsibility to someone else.

For example, say that Driver A accidentally rear-ends Driver B at a stop-light, causing minor damage to both cars’ bumpers. Driver B can file a claim with Driver A’s third-party liability coverage to pay for the damage. However, Driver A cannot file a claim with their own third-party insurance, since they are the first-party in this scenario. Instead, Driver A would need to have collision insurance for the damage to their own car to be covered.

Types of Third-Party Liability Car Insurance

Third-party liability car insurance incorporates two subsections: bodily injury and property damage liability. In addition, car insurance policies usually include three separate payout limits to cover different aspects of third-party liability. For instance, a policy written as 25/50/25 refers to limits of $25,000 for bodily injury claims per person, $50,000 for bodily injury claims per accident, and $25,000 for property damage claims.

Third-party liability car insurance is a term most frequently used outside the United States. In the U.S., insurance companies will usually just call it liability insurance instead.

Liability-only insurance is car insurance that covers a third party's property damage or injuries in the event of an accident. The term “liability-only car insurance” is used to distinguish policies with basic coverage from those with collision insurance and comprehensive coverage.

Liability insurance is the only type of auto insurance that is mandatory in almost every state. It’s split into two main categories of coverage: … read full answerbodily injury liability and property damage liability.

What Liability-only Insurance Covers

• Medical expenses
• Legal fees
• Loss of income
• Pain and suffering
• Funeral costs
• Repairs to/replacement of cars
• Repairs to/replacement of items in the car during an accident
• Repairs to/replacement of other property, like a mailbox, fence, or house

Liability-only insurance is the least expensive car insurance since it provides such minimal coverage. However, driving with only liability insurance can lead to expensive bills for your own property or injuries, which are not covered by liability-only insurance.

Liability-only car insurance is not always an option, either. Some states require drivers to carry other types of insurance as well, like uninsured or underinsured motorist coverage (UM/UIM) and Personal Injury Protection (PIP). And if your car is leased or financed, your lender will likely require you to purchase collision and comprehensive insurance.

For tips on whether liability-only insurance is enough for your situation, check out WalletHub’s guide on how much car insurance to get.