Liability car insurance coverage explained (2024)

In a nutshell

If you drive a car, you are likely legally required to have liability insurance.

• Every state except New Hampshire requires a minimum amount of liability insurance coverage.
• Liability coverage is the core component of most car insurance policies, which covers injuries to other parties or damage to their property.

We’ll cover how liability insurance works, what it covers, and why it’s important to purchase an adequate amount of coverage.

What is liability insurance coverage?

Liability insurance helps to cover the cost of car repairs and medical bills for the other party if you’re ever in an accident. It also covers damage to other types of property, like fences. This type of car insurance coverage is required in most states, with states specifying minimum amounts of liability coverage for bodily injury per person and per accident, as well as property damage per accident.

For example, let’s say you get into an accident with another vehicle. Liability insurance would help to cover the cost if the other driver is injured and incurs medical bills. It would also cover any damage to their vehicle or other personal property, up to the coverage limit specified in your policy.

What does liability car insurance cover?

There are two main components of liability insurance: bodily injury liability coverage and property damage liability coverage. Bodily injury liability covers injuries to other parties. Insurance policies typically include a coverage limit both per person and per accident. Some examples of things that bodily injury liability might cover include:

• Medical bills.
• Legal fees.
• Compensation for lost income.
• Compensation for pain and suffering.

Property damage liability is the other half of liability car insurance coverage. Property damage liability covers damage to the other party’s vehicle, as well as damage to other types of property, like structures that you hit with your car. Some examples of things that property damage liability might cover include:

• Cars.
• Fences.
• Lamp posts.
• Mailboxes.

What does liability insurance not cover?

Liability insurance only covers injury or damage to other people or their property. It doesn’t cover your own medical bills or damage to your car. If you want to purchase auto insurance coverage for yourself or your vehicle, you should consider purchasing collision coverage and comprehensive coverage. Collision coverage includes any damage to your vehicle after an accident. Comprehensive coverage includes damage to your vehicle not as the result of an accident, such as theft, vandalism, or damage from a natural disaster.

Liability insurance limits

When you purchase liability insurance as a part of your car insurance, you’ll need to set limits for the policy. This includes a limit for bodily injury liability per person and per accident, as well as a limit for property damage per accident.

Most states require a certain amount of minimum liability coverage, but it’s usually a good idea to exceed this limit. While higher liability insurance limits are more expensive, they also provide better financial protection in the event that you do get into an accident.

How much is liability coverage?

Liability insurance coverage makes up the bulk of the cost of a typical car insurance policy. How much liability insurance coverage costs depends on a wide variety of factors, including where you live, the vehicle you drive, and personal factors including your driving record, age, gender, and even your credit score.

How much liability coverage do I need?

It’s important to have enough liability insurance coverage in order to guard against financial risk in the case that you get into an accident. When it comes to liability coverage, a good general rule of thumb is to stick to the 100/300/100 rule, which recommends $100,000 in bodily injury liability coverage per person, $300,000 in bodily injury liability coverage per accident, and $100,000 in property damage liability coverage per accident.

Sticking to the 100/300/100 rule can help to ensure that you have the coverage you need to cover the cost of medical and legal bills in the event of an accident. However, if you’re able to afford additional coverage, you should consider increasing the amount of liability coverage for your policy, since the cost associated with a serious accident may sometimes exceed these limits.

What other types of coverage do I need?

Liability insurance is a core component of most car insurance policies. In addition to liability insurance coverage, other types of coverage you might want to consider adding to your policy include:

• UM/UIM: Required in some states, uninsured or underinsured motorist coverage protects you if you get into an accident with a driver who is uninsured or underinsured, including the cost of medical bills or damage to your vehicle.
• PIP: Also required in some states, personal injury protection insurance is also known as no-fault insurance, and covers the cost of medical bills up to a certain limit no matter who is at fault in an accident.
• Collision coverage: Collision coverage covers the cost of repairs to your own vehicle in case you get into an accident.
• Comprehensive coverage: Comprehensive coverage covers non-collision related damage to your vehicle, such as theft, vandalism, or damage from a natural disaster.
• Gap insurance: Gap insurance covers the gap between the value of your vehicle and the amount that you owe on your auto loan in the event that the latter amount is higher, and is sometimes recommended for recently purchased vehicles.
• Umbrella insurance: In addition to the above types of insurance, drivers can purchase umbrella insurance, which provides coverage beyond the existing limits of your policy if you want extra coverage.

Liability insurance is basic protection

Liability insurance is an essential component of auto insurance, and also makes up the bulk of the cost of your policy. When shopping for an insurance policy, it’s a good idea to also consider other types of coverage, such as comprehensive and collision coverage. In general, you should try to purchase as much insurance coverage as you can reasonably afford, since it provides protection in the case of an accident.