Liability car insurance is coverage for injuries and damage sustained by other people and their property in accidents that you cause. Liability car insurance comes in two forms: bodily injury liability coverage and property damage liability coverage.
Bodily injury liability insurance covers expenses related to other parties’ physical injuries caused by your vehicle. Property damage liability insurance pays for repairs to the victim’s damaged property, including a car or a house.
Key Things to Know About Liability Insurance
- It does not cover any of your expenses in an accident.
- It covers property damage and bodily injuries that you cause to others.
- Most states require drivers to carry at least some liability insurance.
- When deciding how much liability insurance to buy, consider your assets and your driving record.
- If you have more assets, you should get more liability insurance to protect yourself in case of a lawsuit.
What Does Liability Insurance Cover?
Most liability insurance policies have different coverage limits for bodily injuries and property damage, which will be expressed as three numbers. For example, the limits might be listed like this:
25,000/50,000/20,000 or 25/50/20
Let’s break this down. The first two numbers deal with bodily injury coverage. One is the maximum that your insurance company would cover per person involved in the accident, and the second is the maximum coverage per accident for all of the injured parties. The third limit is your total property damage coverage.
So, in the above example, the insurance company would cover $25,000 per person for bodily injury claims. But if there were multiple people involved, the company would only cover up to $50,000 in bodily injury coverage for the entire accident. In addition, the insurance company would cover $20,000 in property damages. If there are costs incurred beyond these limits, the injured party could file a lawsuit for the remainder.
What Does Liability Insurance Not Cover?
When you are at fault in an accident, liability insurance coverage does not pay for any damage to your own property, or your medical bills. So while important, it is not the only type of insurance you should consider. Collision coverage and personal injury protection insurance can help protect you and your property further in case of an accident.
When Is Liability Insurance Needed?
When you are at fault in an accident, liability insurance coverage does not pay for any damage to your own property. It does not pay your medical bills, either.
So, while important, liability coverage is not the only type of insurance you should consider. To be protected in the event of an accident, you will need collision coverage and personal injury protection insurance for vehicle damage and injuries, respectively.
Liability Car Insurance Coverage Requirements by State
|State||Min Bodily Injury Per Person||Min Bodily Injury Per Accident||Min Property Damage Per Accident|
|District of Columbia||25k||50k||10k|
* New Hampshire drivers are allowed to forego insurance entirely.
**Virginia drivers have the option to pay a $500 annual uninsured motor vehicle fee in lieu of obtaining liability insurance.
While you’re only required to purchase your state’s minimum amount of coverage, many people decide to purchase optional insurance as well. Keep in mind that some states also require you to purchase additional kinds of insurance, along with liability coverage.
Liability Coverage Car Insurance Cost
Liability insurance costs an average of $588 annually, though the exact cost depends on your state and the amount of coverage that you buy. Your premium will go up as you raise your liability limits, but higher levels of coverage are only marginally more expensive than than the state minimum. As a result, it’s usually best to purchase as much liability insurance as you can afford in order to maximize your protection.
Also, keep in mind that higher levels of coverage are only slightly more expensive, and can save you serious money and hassle if you cause an accident. The example below shows how one driver’s insurance coverage only increases by less than $10 per month on average if she increases her coverage from 25/50/10 to 100/300/500.
Liability Car Insurance Costs by Coverage Level
|Liability coverage limits||Average monthly cost|
Average of monthly quotes received from 8 major insurance companies for a 37-year old single female driver from zip code 94561. This driver is assumed to drive 12,000-15,000 miles annually and drives a 2008 Honda Accord LX.
You can use WalletHub’s Car Insurance Comparison Tool to find cheap liability car insurance and see how much your monthly cost will increase if you purchase additional coverage.
3 Things to Consider Before Purchasing Liability Insurance
Your likelihood of causing an accident and driving history
One of the most important factors impacting your insurance costs is your driving history and the extent to which you have had accidents or traffic violations in the past. In addition, you may be more at risk of having an accident due to some factors that have nothing to do with your driving skills.
If you drive often or drive in a densely populated area, you might be more likely to be in an accident. In that case, you should purchase a higher amount of liability insurance.
The more assets you own, the more auto liability insurance you may need. If you own a home or have significant savings, an accident could be particularly damaging to your finances if the other driver decides to sue you. Conversely, if you do not have many assets, the other party will have fewer options for collecting on a successful lawsuit.
Consider the following example: Let’s say you are found to be at fault in an accident that causes serious damage and involves multiple cars. The total property damage comes to $135,000. Your policy covers just $30,000 in property damage, leaving a balance of $105,000. The other party can sue you for the remaining damages. And if the lawsuit is successful, you may be at risk of losing your home or a significant portion of your savings.
Special state programs for high-risk drivers
If you have serious driving violations on your record, you may have trouble finding a car insurance company that is willing to provide liability coverage—even the minimum required by your state. Many states have special programs for drivers who cannot obtain insurance through the private market because they are considered too high-risk to cover. Because insurance provided through these programs is very expensive, you should only use this option for liability insurance coverage as a last resort.
Ask the Experts
To gain more insight about liability insurance, WalletHub posed the following questions to a panel of experts. Click on the experts below to view their bios and answers.
1. Should drivers purchase more liability insurance than is required by law?
2. What should drivers consider when determining their liability coverage levels?
3. When should drivers purchase only the minimum liability insurance required by their state?