What Is Liability Car Insurance?
Liability car insurance is a type of insurance that covers the cost of injuries and property damage that an at-fault driver causes to another person in an accident. Liability car insurance consists of both bodily injury liability and property damage liability insurance.
Bodily injury insurance pays for the victim’s lost wages and medical bills. Property damage insurance covers repair costs for their vehicle or stationary objects, like their home or fence, that may have been damaged in the accident.
What Does Liability Car Insurance Cover?
|Type of Expense||Covered||Not Covered|
|Medical Expenses||Other peoples’ medical costs after accidents the policyholder is at-fault for||The policyholder’s medical expenses resulting from an at-fault accident|
|Property Damage||Damage to other peoples’ property, including cars, houses, or fences||Damage to the policyholder’s vehicle|
How Does Liability Car Insurance Work?
If you’re at fault for an accident, the other driver will file a claim with your liability insurance policy to have their bodily injury and property expenses paid for. Liability insurance also covers your legal fees if you are sued because of an incident.
While liability insurance is designed to pay for the victim’s accident-related expenses, your insurance company does not simply write a blank check to cover whatever the victim needs. How much the insurance company will pay in the event of an accident is determined by policy limits.
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 insurer offers a certain dollar amount of coverage per incident.
For split-limit policies, your insurance company details how much it will pay for each coverage type. These policies are usually written as 25,000/50,000/20,000 or 25/50/20, for example. The first number is the limit your insurer will cover for bodily injury costs per person, the second is the total bodily injury limit per accident, and the third is the property damage limit.
Learn more about how liability car insurance works.
Liability Car Insurance Coverage Requirements
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.
Learn more about how much liability car insurance you need.
Liability insurance costs an average of $716 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 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.
Learn more about how much liability car insurance costs.
4 Things to Consider When Purchasing Liability Car Insurance
1. States have different liability requirements
Most states require a certain amount of bodily injury and property damage liability insurance. Some states also require drivers to have additional coverage types like uninsured motorist, personal injury protection, or MedPay.
You need at least the minimum coverage required by your state, and it is recommended that you purchase as much coverage as you can comfortably afford.
2. The more assets you have, the more coverage you need
The more assets you own, the more auto liability insurance you may need. If you own a home or have significant savings, for instance, an accident could seriously affect your finances should the other driver decide to sue.
To illustrate this, if you’re at-fault in an accident which causes $135,000 in property damage, but your policy only covers $35,000, the other driver can sue you for the remaining $100,000. If the lawsuit is successful, they may use any and all of your assets to collect on that payment.
3. You may need additional types of insurance
Liability coverage is not the only type of car insurance you should consider. To be fully protected in an accident, you should have collision coverage to protect your vehicle repair costs and personal injury protection insurance to cover your medical expenses.
You should also consider comprehensive insurance, so your car is protected in the event of something besides an accident, like a tree falling or vandalism.
4. There are special state programs for high-risk drivers
Many states have special programs for drivers who cannot obtain insurance through the private market because they are considered too high-risk to cover. Since insurance provided through these programs is very expensive, you should only use this option as a last resort.
Liability Car Insurance Video
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?