Liability insurance coverage

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If you are at fault in a car accident, the other parties involved might file a lawsuit against you to recover the costs associated with their injuries and damage to their property. Without liability insurance, you would be responsible for paying this amount out of pocket.

With liability coverage in place, your policy pays toward costs if you are found at-fault for an accident. This coverage pays for medical costs if someone other than you and your family members gets hurt in an accident you cause, as well as damage you cause to property, such as another person’s car or a lamppost.

Because almost all states require liability insurance, you will likely need to have a policy in place before you get behind the wheel. Liability coverage can protect you from financial devastation if you cause an accident.

What is liability insurance?

Auto liability insurance is a specific type of car insurance coverage that covers injury or damage you cause in a car accident. Within liability coverage, there are two types of coverage that provide different protections.

Bodily injury liability covers the cost of other parties’ injuries that you cause when you are at fault in an accident. This can include emergency care, continued medical costs and even lost wages.

Property damage liability coverage covers the cost of damage to other parties’ property when you are at fault in an accident. The most obvious example is damage to vehicles, but other types of property including buildings and fences are also covered.

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What does liability car insurance cover? What does it not cover?

Liability insurance is designed to make sure that if you cause an accident, you do not leave others with bills for medical expenses or property damage. That is why most states require it. This insurance coverage is a way to prevent the at-fault driver or other affected people from being left with significant out-of-pocket expenses, and to ensure that at least some level of compensation is provided to parties who suffer damage or injury in an accident that you cause.

While auto liability insurance covers most of the categories of costs related to your liability in an accident, there are a few costs that are not covered. For example, liability insurance will not cover damage caused by intentional acts. Other costs are specific to the type of insurance.

What does bodily injury liability cover?

Although every claim is unique, bodily injury coverage will generally cover the following categories:

  • Emergency medical expenses, including an ambulance and hospital care
  • Ongoing medical expenses, such as doctor’s visits and rehabilitation
  • Lost wages
  • Pain and suffering
  • Funeral expenses
  • Related legal expenses

Your bodily injury liability insurance can also help with legal expenses if the person you hurt takes you to court over the accident.

Remember, your bodily injury coverage extends to other parties, not you or any of your related passengers. Also, keep in mind that it only pays up to your policy’s limits. If the injured party’s medical expenses exceed the limit of bodily injury coverage on your policy, you will be responsible for the difference out of pocket.

What does property damage liability insurance cover?

Property damage liability coverage generally pays for:

  • Vehicle damage
  • Damage to buildings, homes or businesses
  • Damage to fences, mailboxes and other structures
  • Lost business revenue
  • Related legal expenses

Your property damage liability coverage pays for damage caused by you to other peoples’ property. It does not help with damage to your own car. For that, you will need collision coverage.

The above expenses are all covered up to your policy limit. Any costs that exceed your policy limit may become your personal responsibility, even if you have liability insurance.

How much does liability insurance cost?

Car insurance costs vary depending on where you live. The average cost for minimum coverage auto insurance in the United States is $565 per year, while full coverage costs $1,674 per year. Drivers in Iowa pay the lowest premium for minimum coverage, at $252 per year. Drivers in Florida pay the most, with an average minimum coverage premium of $1,101 per year.

In addition to the state you live in, insurance companies use several factors to determine your insurance premiums, including:

  • You age
  • The type of car you drive
  • Your driving history
  • Your ZIP code
  • The coverages and coverage limits you choose to purchase

The cost for liability only car insurance coverage can vary depending on any one of these factors. Additionally, you have a range of coverage limits you can choose from. You may choose to purchase state minimum liability limits, for example. If you do, the average cost of coverage in the United States is $565 per year. However, you could choose higher liability limits. Higher limits will give you more protection but will generally increase your premiums.

How much liability insurance do I need?

Everyone has different insurance needs, but there are some general guidelines you can use to help you determine how much coverage you may need. Talking to a licensed agent or insurance professional is always a good way to determine how much coverage is appropriate for your situation.

Know your state’s insurance laws

You will need to purchase at least your state’s minimum required liability limits to legally drive, and these required limits vary by state. You can use our state-specific car insurance guide to see what is required in your state. When viewing required liability coverages, 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 for all people in the 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 coverages. Most insurance professionals recommend that you carry higher liability limits if you can afford to do so.

Think about your financial situation

Insurance is a necessary expense in most states, and for those living on tight budgets, it can be a challenge to pay for an insurance policy that you have not had to use.

However, insurance is important to cover unexpected situations that can happen. Although at times paying for insurance can feel like a strain on your finances, it can help prevent a devastating financial situation for you and your family in the event of an accident.

Consider your net worth

How much liability insurance you need can also depend on your net worth. If you have a lot of assets – such as a house, car or sizable bank account – and not much debt, 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 want to consider an umbrella insurance policy to provide extra liability coverage.

Best providers for liability insurance

Because everyone has different insurance needs, the best car insurance company will vary for every driver. However, based on average premiums obtained from Quadrant Information Services, coverage offerings, available discounts and third-party rankings, the following companies are among the best in the industry:

Car insurance company Average annual premium for minimum coverage
USAA $384
Geico $433
State Farm $539
Progressive $582
Allstate $696

When shopping for car insurance, one of the best ways to find the right policy for you is to obtain quotes from several providers and compare them. This way, you can see who can offer you the coverage you are looking for at the lowest price.

What is the difference between liability insurance and other types of car insurance coverage?

There are several coverages that can be purchased when you are buying an auto insurance policy. Bodily injury and property damage liability coverages are just two of them. You may also want to consider purchasing:

  • Comprehensive coverage: This pays for damages to your own vehicle caused by weather events, fire, theft, vandalism or striking an animal.
  • Collision coverage: This pays for the damage to your car if you are in an at-fault accident with another driver. It also pays for damages to your car if you hit an object or if your vehicle is damaged in a hit-and-run accident.
  • Uninsured/underinsured motorists coverage: Think of these coverages like you are buying liability coverage to protect yourself from drivers who do not have insurance. Uninsured motorists coverage pays for your bodily injury and property damage bills if you are hit by someone who does not have any insurance. Underinsured motorists coverage pays for your bodily injury if the driver who hit you does not have enough coverage to pay for your bills.
  • Roadside assistance coverage: Sometimes called “towing coverage,” this pays for service calls if your vehicle breaks down. It is most commonly used to cover the cost of a tow, but may also cover the call for someone to bring you gas or change a tire.
  • Car rental coverage: If your vehicle is not driveable due to a covered accident, this coverage pays for the cost of a rental vehicle.
  • Gap insurance: If you have a newer car, the actual cash value of your vehicle could be less than your loan amount due to depreciation. Gap insurance pays the difference if your car is totalled, so that you can pay off your loan.
  • There are numerous car insurance coverage options, and each insurance company offers its own suite of coverages. Talking to a licensed agent about your policy may be the best way to determine what coverages you should purchase.

    Frequently asked questions

    What is the right liability car insurance coverage for me?

    Many factors will go into determining the right liability insurance policy for you. Your state limit minimums, personal net worth and driving history are just a few components to think about. Talk to your financial advisor and insurance company about what type of coverage will be sufficient.

    Does liability insurance cover my car if someone hits me?

    Liability insurance does not cover your car if another driver causes an accident. In this case, the other party’s insurance should take care of your damages. You can also purchase uninsured/underinsured motorist insurance in case you are hit by a driver who does not have sufficient liability insurance. If you have collision insurance, you may also be able to pay your deductible and have your collision coverage pay for the rest of the damages to your car.

    What happens if someone hits my car and I only have liability insurance?

    If someone else is at fault in an accident, you should be covered under the other driver’s liability insurance policy. However, if the other driver’s liability limit is not sufficient to cover your costs, your liability insurance policy will not cover anything. You may have to pursue the other driver in court to get a judgment against their personal assets. Alternatively, you can carry uninsured/underinsured motorist coverage to step in when the other driver does not have enough or any liability coverage.

    Will my personal assets still be at risk if I have liability insurance?

    If you cause an accident in which the other parties’ costs exceed your liability insurance limit, your personal assets can still be at risk. Consider purchasing a policy with a limit that covers your total net worth. You can also buy umbrella insurance to get more liability protection.

    What happens if I cause an accident and the other driver makes a liability insurance claim?

    If you are found to be at-fault in an accident and your insurance company has to pay for the other driver’s damage, you can expect your insurance premiums to go up in most cases. To keep premiums low, make sure to obey traffic laws and avoid driving behaviors that can cause accidents. Some insurance providers also offer safe driving programs that monitor your behavior on the road and provide discounts for good habits.