Bodily Injury Liability Insurance

You should have at least as much bodily injury liability insurance coverage as your state requires, and it's good to purchase coverage limits that are equal to your assets. Maintaining enough bodily injury liability insurance to cover your net worth is recommended to prevent lawsuits.

Bodily injury liability coverage pays for other drivers' and passengers' injuries when the policyholder is at fault in an accident. Bodily injury liability can cover medical bills, funeral expenses, lost wages, legal fees, and other related costs.

How Much Bodily Injury Liability You Need

Drivers everywhere except New Hampshire, Virginia, and remote parts of Alaska are required to carry at least their state's minimum required amount of bodily injury liability coverage. And in every state, you are legally responsible for serious injuries resulting from car accidents that you cause.

In most states, if your bodily injury limits are not high enough to pay for all the medical bills from an accident, the not-at-fault driver and their passengers can sue you for any uncompensated expenses. Drivers with a high net worth are especially vulnerable targets for lawsuits if their bodily injury coverage does not pay for all of the other driver's expenses.

Consequently, you should have enough bodily injury liability coverage to equal your assets, rather than just carrying your state's minimum. After all, the National Association of Insurance Commissioners reports that the average bodily injury liability claim in 2016, the latest year with data, was $19,201 – more than some states require in coverage.

If you need more coverage than car insurance companies sell, you can always purchase an umbrella policy to keep your assets from being seized in the event of a lawsuit.

Bodily Injury Liability Requirements by State

Full coverage insurance can include $30,000 to $500,000 in bodily injury liability coverage per accident, depending on the state and insurer. Bodily injury liability insurance is a standard part of full coverage, in addition to property damage liability, collision, and comprehensive coverage. To be clear, full coverage is not a specific type of insurance but rather a blanket term referring to any policy that includes comprehensive and collision insurance in addition to state minimum coverage requirements.

The amount of bodily injury liability insurance that you need depends on your state and your net worth. In most states, drivers are only legally required to purchase between $30,000 and $100,000 in bodily injury liability coverage per accident. But it's generally a good idea to purchase enough liability insurance to cover your net worth instead of only purchasing your state's required coverage. For the average driver, a $300,000 bodily injury liability policy will be sufficient, but many insurers allow policyholders to purchase limits up to $500,000.

If your net worth is more than $500,000, you should consider purchasing a personal umbrella policy in order raise you liability limits even higher. Most umbrella policies offer a minimum of $1 million in coverage, and some insurers offer limits of $10 million or more.

To learn more, check out WalletHub's guide to bodily injury liability insurance. 

In auto insurance, the difference between medical payments and bodily injury coverage is that medical payments (MedPay) insurance covers the policyholder, while bodily injury coverage applies to a third-party. Liability insurance only ever pays for damage caused to others, but MedPay applies regardless of fault. In addition, bodily injury coverage is required in almost every state, while medical payments insurance is only required in Maine and New Hampshire.

Medical Payments vs. Bodily Injury Auto Insurance Coverage

The bottom line is that bodily injury liability and medical payments auto insurance coverage pay for similar things but in different situations. You can only file a bodily injury claim with an at-fault driver's liability insurance. But if you cause the accident yourself, you need to file a claim with your own medical payments insurance, or with your personal injury protection (PIP) coverage if you don't have MedPay.

Furthermore, medical payments insurance is often used as supplementary coverage to a health insurance plan, since MedPay can help you avoid expensive deductibles, copays, and coinsurance costs. MedPay can also be used if the policyholder is walking or biking instead of driving when a collision occurs.

The difference between bodily injury and personal injury coverage in car insurance is that personal injury protection pays for the policyholder's own medical bills, while bodily injury coverage pays for others' medical bills when the policyholder is at-fault. Bodily injury coverage is a form of liability insurance. It is required in almost every state, but only 13 states require personal injury protection (PIP). It's also worth noting that bodily injury coverage does not have a deductible, while PIP generally does.

Bodily Injury vs. Personal Injury Car Insurance

Since PIP applies to the policyholder, their passengers, and their household members regardless of fault, it is often referred to as no-fault insurance. It is required in states with no-fault laws, where drivers must file claims for minor injuries with their own PIP insurance rather than with the at-fault driver's bodily injury liability coverage.

To learn more, check out WalletHub's guides to bodily injury liability insurance and personal injury protection.

The numbers in liability insurance mean that an insurer will only pay for bodily injury or property damage liability claims up to a certain dollar amount. These policy limits are typically expressed as three numbers that each represent an amount in thousands of dollars, like 25/50/25. With a 25/50/25 policy, the insurance company will pay up to $25,000 per person for bodily injury claims and up to $50,000 in bodily injury claims per accident. Additionally, it will cover up to $25,000 in property damage for each accident.

Every liability car insurance policy includes limits that are expressed with these numbers, and the order and notation are always the same. Once you know what the numbers in liability insurance mean, you can better understand how your own policy works. 

What the Numbers in Liability Insurance Mean

1^st Number: The maximum amount of bodily injury liability coverage per person.

2^nd Number: The maximum amount of bodily injury liability coverage per accident.

3^rd Number: The maximum amount of property damage liability coverage per accident.

Examples of Liability Insurance Limits

It's important to remember that these coverage limits only apply to other people's expenses after an accident that you cause. If the cost of a bodily injury or property damage liability claim exceeds your policy limits, you can be left personally responsible for covering the remaining amount. As a result, you should purchase as much liability insurance as you can afford in order to protect your finances in case you cause a severe accident.

To learn more, check out WalletHub's guide to liability insurance.

Liability-only insurance is car insurance that pays for other people's injuries or damage to other people's property, but not the policyholder's injuries or property. 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: bodily 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.

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.

Liability insurance is required by law for nearly all drivers in the U.S. Every state except for New Hampshire and Virginia requires drivers to carry at least a minimum amount of liability car insurance to cover injuries and property damage they may cause to others.

In states where liability insurance is not required, you must prove that you can afford to pay for a victim's expenses if you were to cause an accident. You also need to pay a fee in Virginia to be able to register a vehicle without liability insurance. 

Liability Car Insurance Requirements by State 

See the full list of state liability insurance coverage requirements.

Other Types of Liability Insurance

General liability coverage is not legally required, but licensing departments, lessors, or clients may require business owners to have it. Homeowner liability insurance is also not required by law, but lenders almost always require it as part of a mortgage agreement.

To learn more, check out WalletHub's guide to liability insurance.

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.

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.

You need enough liability insurance to cover the full value of your assets. Your bodily injury liability coverage should be as much as your net worth, while your property damage liability insurance can be slightly lower since property damage claims are usually less expensive. Purchasing enough liability insurance to cover the value of your assets protects you from financial ruin if you cause 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.

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.

Liability insurance works by helping to cover costs incurred by other people in accidents that you cause. Most liability insurance plans cover bodily injuries and property damage for accidents in your home or business, or because of a vehicle collision. Liability insurance also helps to pay for your legal fees if you are sued because of such an incident.

The most common types of liability insurance are general liability insurance for businesses, the liability coverage provided by a homeowners insurance policy, and liability car insurance. Liability car insurance comes into play when the policyholder is found to be at fault for a car accident. The at-fault driver's liability insurance provides coverage for the victim's medical bills and property damage caused by the accident.  

Two Types of Liability Car Insurance

• Bodily injury liability insurance pays for the other person's medical bills and lost wages when you cause an accident.

• Property damage liability insurance covers repair costs for the other person's vehicle or certain stationary objects like their home or fence that you may have damaged in the accident.  

How Liability Insurance Limits Work

Liability insurance policies are often described as either a combined single-limit policy or a split-limit policy.

In a combined single-limit policy, your insurance plan offers a certain dollar amount of coverage per incident, and it is then portioned between bodily injury and property damage depending on what damage is done.  

For a split-limit policy, your insurance company will determine how much it will pay out for each type of liability coverage. These types of policies are often written out as something like 25,000/50,000/20,000 or 25/50/20.

In the event of an accident, the first number is the limit your insurer will pay per person for bodily injuries, the second is the bodily injury limit per accident, and the third describes the property damage limit. 

Example of How Liability Insurance Works 

Here's an example of what might happen if your car insurance policy has liability limits of 25/50/20 and you cause a major accident on the highway, injuring two people:

• Person 1 has $65,000 in medical bills and their car is totaled, costing $20,000 in property damage.

• Person 2's medical costs total $20,000, and their car has $5,000 in damage. 

• You would be responsible for $40,000 of Person 1's medical bills but none of Person 2's medical bills (since your per-person bodily injury limit is $25,000 and your per-accident limit is $50,000).

• You would be responsible for none of Person 1's property damage, but you would have to pay Person 2's $5,000 in property damage (since your policy covers a total of $20,000 in property damage). 

To learn more, check out WalletHub's guide to liability car insurance.