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If you’re driving and get into an accident, your liability car insurance will cover injuries and damage that you cause to others. That can protect your finances and keep you on the right side of the law since most states require some level of liability coverage.
It’s typically divided into two parts: Bodily injury liability and property damage liability . Here’s a closer look at how liability car insurance works so you can better understand your coverage.
What is liability car insurance coverage?
Liability car insurance is designed to protect drivers. If you’re in an accident with another driver and they’re at fault, their liability coverage will pay to repair or replace your car. It can also cover your medical bills if you’re injured, and the same goes for your passengers. For this reason, liability car insurance is required in the majority of states.
Learn more: What to do after a car accident: Your step-by-step guide
What does liability car insurance cover?
As a driver, you can count on your liability car insurance to cover the following if you’re at fault in an accident:
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Damage you cause to other vehicles, as well as to public or private property
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Injuries you cause to other drivers or their passengers
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Legal costs if someone brings a lawsuit against you after the accident
Learn more: How much does car insurance increase after an accident ?
How to read liability limits
Whether you’re shopping around for a new car insurance policy, reading over your existing coverage limits, or reviewing your state’s minimum car insurance requirements , you’ll see liability car insurance coverage expressed as three numbers:
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The first number:The amount of bodily injury coverage per person
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The second number:The amount of bodily injury coverage per accident
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The third number:The amount of property damage coverage per accident
As an example, Alabama requires drivers to carry 25/50/25 liability coverage. That translates to $25,000 in bodily injury coverage per person, $50,000 in bodily injury coverage per accident, and $25,000 in property damage coverage per accident.
What liability car insurance won’t cover
Liability coverage is an important part of your auto insurance policy, but it doesn’t cover everything. Here are some key exclusions to be aware of:
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Damage to your car if you’re at fault in an accident
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Damage to your car that’s caused by something other than a collision, such as vandalism, theft, flood damage , or an animal strike
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Lost wages, funeral expenses, childcare, and at-home care if you’re affected by an accident-related injury
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The cost of a rental car if you need one while your vehicle is being repaired or replaced
Is liability car insurance mandatory?
Liability car insurance of at least some form is required in every state except New Hampshire. New Hampshire drivers will need to prove that they’re financially able to pay for personal injuries and property damage if they cause an accident. That means that uninsured motorists are still legally liable for accidents they cause.
How liability car insurance works
Let’s say you overlook a stop sign while driving and ram into another car. The other driver’s car is damaged, and they have some minor injuries. Since you caused the accident, you would file a liability insurance claim with your insurer to cover their car repairs and medical bills. Once the claim is approved, your insurance company will pay up to your coverage limits.
But things aren’t always so cut-and-dried, especially if there’s a question of who’s at fault. It’s also possible for another driver to sue you, in which case your liability insurance would cover some or all of your legal fees (depending on your coverage limits).
If you’re involved in an accident caused by another driver, you could also file a claim with your insurance company to receive additional support – such as rental car reimbursements while your vehicle is in the shop.
How much is liability insurance?
The average cost of liability car insurance nationally wasnearly $662 per year in 2022, according to the National Association of Insurance Commissioners (NAIC). But costs can vary significantly depending on where you live. In Florida, for example, the average annual cost was $1,152. Meanwhile, drivers in North Dakota paid an average of $308.
How much cheaper is liability vs. full coverage?
Full coverage car insurance is a policy that includes liability, comprehensive, and collision coverage. On average, liability insurance alone costs nearly half as much as full coverage, according to the NAIC. The average cost of full auto coverage nationally was $1,258 in 2022.
Vehicle, driving history also matter
Keep in mind that insurance rates can also be affected by prior insurance claims. Having an active claims history can suggest that you’re risky to insure. In some states, your credit score can impact your liability car insurance premium. Your vehicle type may also play a role in your liability insurance rate.
Learn more: How is your car insurance premium calculated?
How to save money on liability insurance
You can take additional steps to keep your liability insurance rates on the lower side. That may include:
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Maintaining a safe driving record
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Keeping your credit score as strong as possible
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Insuring multiple cars
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Modifying your coverage in a way that aligns with your risk profile and state requirements
Learn more: Car insurance discounts: 17 ways to save
How much liability insurance do I need?
The amount of liability insurance you need depends largely on the following factors:
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Your state’s minimum coverage requirements
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How much you could potentially lose in a lawsuit if you were found at fault in a car accident
Insurance will pay up to your policy’s coverage limits. After that, any injured parties could sue you personally to recoup their losses. Ideally, you’ll carry enough liability coverage to protect your assets in the event of a lawsuit.
What insurance coverage should you have besides liability?
When setting up your car insurance policy, look first at the minimum insurance requirements in your state, and then consider add-on policies to increase your protections. Below is a breakdown of different types of car insurance:
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Collision insurance : Damage to your car if you cause an accident
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Comprehensive insurance : Damage to your car that’s caused by something not related to a collision, whether that’s theft, vandalism, an animal strike, or weather
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Medical payments coverage : Medical bills for yourself or your passengers after an accident, no matter who was at fault
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Personal injury protection : Medical bills for yourself or your passengers after an accident, no matter who was at fault – plus lost wages, funeral expenses, childcare, and at-home care
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Uninsured motorist coverage : Medical bills and car repairs caused by an uninsured driver
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Rental car reimbursement : Rental car bills if your car is in the shop after a covered event
When would you want liability-only vs. full coverage?
If your vehicle is fully paid off, you could save money by carrying liability-only car insurance. This could make sense if your car is older, damaged, or has a low actual cash value .
Your financial situation is also important. If you could easily afford to repair or replace your car on your own, liability-only car insurance may be a good option.
How to get rental car liability coverage
When you rent a car, the company will likely ask if you want to add rental car insurance to your reservation. But if you have a personal car insurance policy, your liability coverage will likely apply to rental cars. That could cover any injuries or damages you cause while driving your rented car. Having said that, you might choose to add their insurance if you have a low liability coverage limit or want to avoid filing a claim with your insurance company in the event of an accident.
Penalties for not having liability insurance
Failing to carry adequate liability insurance can lead to major consequences, such as:
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Citations
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Fees and fines
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A suspended license and/or registration
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Vehicle impoundment
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Time in jail
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Higher insurance rates
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Having to obtain an SR-22 to prove you have enough car insurance
Why would you need liability insurance if you don’t have a vehicle?
You may choose to carry liability coverage even if you don’t have a car. This is known as non-owner car insurance , and it might be a good idea if you frequently borrow or rent cars and want to stay protected. This type of liability coverage is usually more affordable.
If you’re required to obtain an SR-22, which may be the case if you’ve been convicted of a DUI or other major driving-related offense, your state might require you to carry liability insurance – even if you don’t own a car.
Learn more: Here’s how a DUI impacts your car insurance
Liability car insurance frequently asked questions
What does it mean if the coverage limits are $250,000/$500,000?
When comparing car insurance quotes, you might come across some shorthand to describe coverage amounts. $250,000/$500,000 for bodily liability insurance means that the policy covers up to $250,000 for bodily injuries per person and up to $500,000 for bodily injuries per accident.
Does liability insurance cover if you hit a car?
Yes, this is the main purpose of liability car insurance. It covers damage you cause to other cars and property while driving. It also covers injuries you cause to others.
What happens if someone hits me and I only have liability?
Liability insurance does not cover damage to your car. If you’re hit by another driver, they can file a liability claim with their insurance company to pay for your damage. If things don’t go as planned, you could file a lawsuit.
Tim Manni edited this article .
