Liability insurance provides protection in cases where your actions cause harm or damage to other people or their possessions. Liability auto insurance provides coverage when you cause damage with your car. It also pays for another person’s medical treatment, lost wages, and property damage from an accident in which you’re at fault.

Liability auto insurance is an important and often legally required part of your auto policy, so pay attention to how liability coverage is divided up in your policy. You’ll also want to learn what coverage minimums are required in your state.

Definition and Examples of Liability Auto Insurance

Liability auto insurance is the portion of an automobile insurance policy that pays out when you are found at fault in an auto accident. It’s divided into two common types:

  • Bodily injury (BI): Covers medical expenses, lost income, legal fees, and funeral expenses.
  • Property damage (PD): Pays for damage you cause to another person’s vehicle or their property.

Auto insurers provide liability coverage for each type up to certain limits that are set out in your policy.

A third category, uninsured/underinsured motorist coverage, is technically liability auto insurance, but it doesn’t cover your liability. Instead, it covers the liability of other drivers who might cause an accident but don’t have any or enough auto insurance to pay for the damages.

  • Alternate names: bodily injury liability insurance, property damage liability insurance, auto liability insurance

How Liability Auto Insurance Works

To understand how liability auto insurance works, consider the following scenario. Imagine you accidentally rear-end the car in front of you. This damages its bumper and throws the driver and passenger forward, injuring them. Your bodily injury liability coverage would pay for doctor visits and treatment for the driver and passenger (if you are deemed at fault for the incident). If they miss work due to their injuries, bodily injury coverage could pay their lost wages as well. Your property damage liability coverage would pay to repair their vehicle’s bumper.

When an accident occurs, the drivers involved should ideally get a police report and exchange insurance information. This allows their insurance companies to better assess who is at fault, meaning who caused the accident and is liable for damages. Considering the accident’s details and the extent of damages, insurers can then decide how much to pay out.

Liability auto insurance is designed to place a greater financial burden on the driver who causes an accident (or their insurer). After all, if someone is negligent or breaks traffic laws and harms you in the process, you don’t want your insurance company to have to pay out a big claim—potentially raising your premium as a result.

Every accident evaluation and claim process is a little different. If you’re in an accident in which the other driver is at fault, keep detailed records of damages, including doctor visits and time off work, to make sure you get sufficiently compensated.

Coverage Limits in Liability Auto Insurance

Liability coverage is often expressed in a three number sequence like 25/50/25 (each referring to thousands of dollars for coverage limits). While each company may offer you different levels, they’ll use the same order for these numbers:

  1. The per-person maximum for bodily injury payments: In our example, the per-person limit is $25,000. Let’s say one injured person needs $10,000 in medical care and another needs $30,000. The insurer would pay for all of the first person’s medical needs but only $25,000 for the second injured person’s care.
  2. The per-incident maximum for bodily injury payments: In our example, the per-incident maximum is $50,000. Even if three people need $25,000 each in medical care (for a total of $75,000), the insurer would cap the payment at $50,000.
  3. The per-incident maximum for property damage costs: In our example, the per-incident property damage maximum is $25,000. The at-fault driver’s insurer would, in this case, pay no more than $25,000 for damages to vehicles, a fence that was struck, etc.1

If expenses exceed the limits you have available through your insurance policy, you’ll be responsible for paying the rest of the costs out of pocket. If the drivers involved have underinsured/uninsured motorist insurance, that coverage may help pay those costs as well.

Don’t get confused: If you cause an accident, liability auto insurance doesn’t pay for the damages to your own vehicle or any of your own medical expenses. For that, you’ll need other insurance types, including collision and comprehensive coverages.

Do I Need Liability Auto Insurance?

In most states, liability coverage is required. But there’s often variation in the minimum liability coverage requirements by state. For example, California requires minimum coverage of 15/30/5 ($15,000 BI per person/$30,000 BI per accident/$5,000 PD),2 while Texas requires 30/60/25 ($30,000 BI per person/$60,000 BI per accident/$25,000 PD).3

Some states even allow motorists to pass on liability insurance coverage. In Virginia, for instance, paying a $500 Uninsured Motor Vehicle (UMV) fee allows you to drive at your own risk.4 New Hampshire is another state that may allow you to drive without liability insurance. It doesn’t require a fee to drive while uninsured, but you may need to prove financial responsibility (that you can cover the costs arising from an auto accident) in some situations.5

Consider getting more coverage than your state’s minimum requirement—minimum coverage may still leave you with out-of-pocket costs if damages exceed your coverage limits and could leave you vulnerable to lawsuits.

Alternatives to Liability Auto Insurance

One alternative to liability auto insurance is paying out of pocket if you are found liable for an accident. However, this isn’t always possible, given state laws, so your “alternative” may be purchasing the minimum coverage for your state and being prepared to cover any additional amounts out of pocket. But considering how expensive medical bills and property damage can be, it’s often a good idea to have robust liability coverage to protect your other assets.

Having at least the minimum coverage helps you avoid the economic vulnerability of suddenly being responsible for a large out-of-pocket expense if you are found liable, particularly if you are sued.

How To Get Liability Auto Insurance

You can get quotes for auto insurance from individual insurance agents, online with individual companies, or from an insurance quote aggregator that finds quotes from a variety of different companies, allowing you to compare. If you think the liability coverage looks a little light, you can adjust your quote to request higher limits, which may only result in a small change to your monthly or yearly premiums.

Key Takeaways

  • Liability insurance is generally broken down into bodily injury liability coverage and property damage liability coverage.
  • Liability auto insurance helps pay the expenses of others when you are found at fault for an accident with your vehicle.
  • Liability auto insurance limits are often expressed in terms of three numbers, such as 25/50/25, that represent the per-person bodily injury limit, the per-accident bodily injury limit, and the per-accident property damage limit.
  • Most states require a minimum amount of liability auto insurance, but you can purchase more coverage for peace of mind and to protect your assets.

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