Liability car insurance: what it covers and how much it costs
Key takeaways
- Liability coverage helps you pay for another driver’s vehicle repairs and medical expenses if you are at-fault in an accident.
- This type of coverage can pay out for both property damage and bodily injury claims.
- Most states only require liability coverage to meet mandatory insurance minimums.
Car insurance is not just a good idea, it’s required by law in all states except New Hampshire. While states set their own mandates, you’re typically required to have liability-only coverage as a bare minimum. Liability insurance is especially critical in at-fault, or tort, states. In these areas, the person who causes the accident is responsible for all related expenses for everyone involved. Understanding liability insurance for your car can help you decide how much coverage you want, need and can afford.Â
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Powered by Coverage.com (NPN: 19966249)
Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
What is liability insurance?
Liability insurance is the type of coverage that pays for other drivers’ vehicle damage and medical care. For instance, if you rear-end another car, your liability coverage is what would pay for their vehicle repairs and any medical treatment. Does liability insurance cover your car if you hit someone else? Unfortunately not. This type of coverage doesn’t help you pay for your own damage or those of your passengers. You would need to purchase optional collision coverage which protects you and your vehicle in an at-fault accident. With liability-only auto insurance, you would need to pay out-of-pocket to fix your own car or pay medical bills. Sometimes liability coverage is referred to as minimum coverage.
How liability insurance works
Liability auto insurance functions by covering expenses linked to damage and injuries to others when you are deemed responsible for a car crash. This type of auto insurance includes two main components: bodily injury liability and property damage liability.
- Bodily injury liability covers the medical bills, lost earnings and any legal costs if you’re sued because of the accident.
- Property damage liability covers costs to repair or replace another person’s property, such as a vehicle or a fence, damaged in the accident — it can even cover the other person’s personal property inside the vehicle.
Your liability coverage limits are the maximum amount your insurance company will pay per person or accident and are decided when you purchase your policy. If the accident expenses exceed these limits, you may need to pay the extra costs out of pocket. Factors such as state minimum requirements, coverage availability and cost can influence your policy limits. Note that purchasing only the state minimum required liability coverage could leave you financially vulnerable in an at-fault accident.
What does liability car insurance cover?
Auto liability insurance covers medical payments and property damage for others resulting from a car accident, which is why it is required in almost every state and Washington D.C. It helps prevent the at-fault driver or other affected people from being left with significant out-of-pocket expenses. It also helps the not-at-fault driver receive some level of compensation for suffering damage or injury that the accident was found to cause.
What does bodily injury liability cover?
Bodily injury liability insurance covers a wide array of medical expenses and other financial strains for those injured in an accident where you are at fault. This includes costs for the following:
- Emergency medical attention and ambulance
- Hospital charges
- Continued care expenses and necessary medical equipment
- Lost wages
- Pain and suffering
- Funeral expenses
- Legal costs
What does property damage liability insurance cover?
Property damage liability insurance covers the costs of repairing or replacing another person’s property damaged in an accident where you were at fault. This can include the following:
- Damage to the other party’s vehicle
- Rental car for the other driver
- Personal property inside the other party’s vehicle, such as groceries or sports equipment
- Property damage, such as buildings, fences or treesÂ
Examples where liability insurance coverage applies
There are a variety of scenarios where your liability insurance kicks in. This includes accidents involving other drivers, inanimate objects and pedestrians.
Example 1: You slide on a patch of ice and hit the car in front of you at a stop light. You exchange information with the other driver and are deemed responsible for the crash. It costs $5,000 to repair the other driver’s vehicle and $6,000 to fix your own vehicle. Your liability insurance would cover the $5,000 of expenses claimed by the other driver. You would be on the hook for the $6,000 it takes to fix your own car. In order to have your own costs covered, you would need collision coverage in this situation.
Example 2: You are waiting to make a right turn on a busy street. As you turn your head to the left, a pedestrian approaches from the left and you roll into them. Your bodily injury coverage would pay for their medical expenses and lost wages. If the pedestrian is on a bike or skateboard, your insurance could also pay to replace their lost equipment.
What doesn’t liability insurance cover?
While liability insurance covers most costs related to your liability in an accident, first-party losses are not covered. First-party losses are those related to you and your passengers. For example, liability insurance usually will not cover:
- Damage caused by intentional acts
- Vehicles on your policy
- Medical payments for you or your passengers
To have costs covered for your vehicle or medical payments for you or your passengers, you’d need to rely on specific optional insurance coverages, like comprehensive and collision insurance, for your vehicle repair costs. Typically, personal injury protection or medical payments coverage step in to help cover your medical bills and those of people in your vehicle.
Supplemental spousal liability (SSL) is the exception to the rule regarding liability coverage potentially applying to a passenger in the at-fault driver’s vehicle. New York car insurance laws recently required all insurers to include SSL coverage on all private passenger auto policies. SSL can pay for medical payments to the spouse if they are injured in a car accident where their partner was the at-fault driver. For example, this coverage could be helpful if the driver hits a patch of black ice and their spouse is severely injured. Once the PIP coverage on the policy is exhausted, the spouse could file a claim under SSL to pay for any covered medical overages. Policyholders can choose to waive the coverage in writing.
How much does liability insurance cost?
As of February 2025, the average cost of car insurance in the United States is $773 per year for minimum coverage, while full coverage costs an average of $2,670 per year. While liability insurance for your car makes up a portion of those premiums, your total car insurance costs will vary depending on your liability limits and other coverage types on your policy.
In addition to the state you live in, insurance companies use several individual factors to determine your insurance premiums, including:
- Your age (in most states)
- The type of car you drive and how many miles you log per year
- Your motor vehicle record
- Your ZIP code (in most states)
- Your credit-based insurance score (in most states)
- Coverage types and limits you choose to purchase
Most companies give you various coverage limits and options. While higher limits will provide you with more coverage in the case of an at-fault accident, they’ll increase your monthly cost, as higher limits generally increase your premiums. On the other hand, cheap liability-only car insurance will usually have pretty low premiums to compensate for the fact that you have a lot of out-of-pocket responsibilities.
How to calculate the amount of liability insurance you need
Everyone has different insurance needs, but some general guidelines can help you determine how much coverage you may need.
Understand your state’s insurance laws
The minimum coverage needed to put your car on the road depends on your state and whether it is a no-fault or tort state (states that hold drivers responsible for damage and injuries caused to others). In a no-fault state, a driver may also be required to carry personal injury protection (PIP) insurance in addition to liability, property damage and bodily injury coverage.
Uninsured and underinsured motorist coverage may also be required, and MedPay is required in some states.
In most states, you will need to purchase at least your state’s minimum required liability limits to drive legally, and these required limits vary by state. Knowing your state’s minimum liability limits is useful when looking at coverage and policies. Still, insurance companies cannot offer you an insurance policy that falls below the legal limits.
When viewing required liability coverage types, you will see three numbers separated by a forward slash.
- The first number is the minimum bodily injury liability required per person in thousands
- The second number is the minimum bodily injury liability required per accident in thousands
- The third number is the minimum property damage liability required in thousands
So when you see 25/50/25 for Alabama, that means if you live in Alabama, you must carry at least $25,000 of bodily injury liability per person, $50,000 of bodily injury liability per accident and $25,000 of property damage liability.
These are just the minimum required coverage options, so most insurance professionals will recommend that you carry higher liability limits if you can afford to do so to provide greater financial protection in at-fault accidents.
Think about your financial situation
With car insurance rates increasing rapidly over the past few years, it has been challenging for many policyholders to keep up with their insurance payments. While forgoing auto insurance may seem like a quick fix to a tight budget, maintaining continuous coverage can save you from greater financial strain.Â
For instance, if you crash your car into someone else’s property and are sued for the damage, the costs you pay in this scenario are likely much higher than what you would have paid to have car insurance coverage. Not having auto insurance could also open you to state penalties and the risk of driver’s license and vehicle registration suspension.
Canceling your insurance or a lapse in coverage could also make you a high-risk customer and result in more expensive premiums later. Therefore, instead of forgoing insurance, look for an affordable insurer and available discounts to keep your costs low.
Consider your net worth
How much liability insurance you need will also depend on your net worth. If you have significant assets — such as a house, car or sizable savings account — you may want to purchase more liability insurance to cover your net worth and prevent assets from being taken in a judgment. You may even consider an umbrella insurance policy to provide extra liability coverage above typical standard car insurance policy limits.
It’s generally thought that you’ll want liability insurance that at least covers your net worth; however, consulting a licensed insurance professional is always a good way to determine how much coverage you need.
Best providers for liability insurance
Because everyone has different insurance needs, the best car insurance company will vary for every driver. The following companies, chosen by market share, have available discounts and third-party rankings worth considering:
| Car insurance company | Average annual premium for minimum coverage (to meet state liability requirements) |
|---|---|
| Auto-Owners | $494 |
| USAA | $564 |
| Geico | $568 |
| Travelers | $588 |
| Progressive | $710 |
Drivers looking to save money on car insurance may want to check with their agent about discount opportunities and other ways to reduce their premiums. Carriers offer a wide range of discounts, and by getting quotes from multiple providers, you may find one with discounts geared toward your driving profile. Typical discounts include price cuts for being a safe driver, bundling your auto and home insurance, being associated with a particular insurer or having a low annual mileage.
What is the difference between liability insurance and other types of car insurance coverage?
Liability insurance helps pay for the medical expenses and damage caused to the other driver, their passengers and their property. However, it does not pay for your vehicle damage or injuries if you are the at-fault driver. To financially protect yourself from a broader range of scenarios, you may want to consider purchasing the following types of optional insurance coverage as well:
- Comprehensive coverage: This pays for damage to your own vehicle caused by non-collision events like severe weather, fire, theft, vandalism or striking an animal. For instance, it may be able to reimburse you if a hail storm cracks your windshield or you hit a deer. Damage caused from hitting stationary objects or potholes is typically excluded.
- Collision coverage: This pays for damage to your vehicle caused by collisions with other vehicles or objects and applies to at-fault accidents. If you hydroplane off the road and hit a stationary object like a fence, this type of coverage would also apply. It can also cover rollover accidents and pothole damage.
- Uninsured/underinsured motorists coverage: This type of coverage helps pay for injuries caused by a motorist with little to no insurance coverage and may help in the case of a hit-and-run. In some states, this coverage is mandatory. In other states, it may be required to be offered to all policyholders but they can opt-out. And some states make it available as an optional purchase.
- Roadside assistance coverage: This helps pay for expenses when your vehicle breaks down or needs a tow. It can also help if you have a dead battery and need a jump or lose your keys. Some insurers will also send someone to bring gas or change a tire in case of emergency.
- Car rental coverage: This covers the expenses for a rental vehicle while your car is in repair after a covered incident up to certain limits, typically for up to 30 days.
- Gap insurance: This pays for the outstanding loan amount on a financed vehicle if it is totaled or stolen before the loan or lease has been paid off. For example, if you still owe $11,000 on a car loan, but you only get $8,000 from your insurer based on current value, this type of insurance would cover the remaining balance.
- Personal injury protection (PIP): PIP insurance may provide coverage if you or your passengers are injured in a car accident, regardless of who is at fault. PIP is usually required coverage in no-fault states, but in some states, it might be optional or not available at all.
There are numerous car insurance coverage options, and each insurance company offers its own suite of available coverage. Talking to a licensed insurance agent about your policy may be the best way to determine what coverage options you should purchase.
Frequently asked questions
Methodology
Bankrate utilizes Quadrant Information Services to analyze February 2025 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Rates are weighted based on the population density in each geographic region. Quoted rates are based on a single, 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:
- $100,000 bodily injury liability per person
- $300,000 bodily injury liability per accident
- $50,000 property damage liability per accident
- $100,000 uninsured motorist bodily injury per person
- $300,000 uninsured motorist bodily injury per accident
- $500 collision deductible
- $500 comprehensive deductible
To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2023 Toyota Camry, commute five days a week and drive 12,000 miles annually.
These are sample rates and should only be used for comparative purposes.
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