Liability Car Insurance - What Is It and How Much Do You Need?

What you don't know about auto liability coverage could hurt you (and your wallet). Learn how to choose the right liability car insurance for your needs.

car key on liability insurance policy paperwork

If you're a car owner, hopefully you’ve at least heard of liability insurance. But how much do you know about this kind of auto coverage? It's more important than you may think.

Auto liability insurance helps you pay at-fault traffic accidents. Plus, state law usually requires it.

The info included here will help you understand:

  • What this kind of car insurance covers and doesn't cover
  • How its policies tend to be structured
  • How its premiums are calculated
  • How much of it you should purchase

What is Auto Insurance Liability Coverage?

Liability car insurance protects you if you cause an accident. It does that by covering the costs of injuries to other people that result from the crash. It also covers related vehicle or property damage to other people.

Something it doesn’t cover is expenses resulting from your own injuries. It also won’t pay for damage done to your own property or car. There are other kinds of coverage to protect you in those situations.

As such, you're responsible to pay for your own damages when you’re at fault in an accident. Liability helps pay for damages to that you cause to other people, but it’s easy to exceed coverage limits after an accident. If you can’t afford to pay the total amount, the other party can sue you for damages. You could lose your home or other assets.

What Liability Policies Cover and Don't Cover

Liability coverage usually consists of three parts:

  1. Bodily injury per person
  2. Bodily injury per accident
  3. Property damage

The first part is the payout for a single person injured in an accident. The second part is how much paid for all injuries in a single accident. The third part is how much paid for property (not yours) damaged. "Property" in this case mainly refers to other's cars or other assets.

Here are some of the costs "bodily injury" covers:

  • Emergency aid at the scene
  • Medical bills, including those tied to rehabilitation efforts
  • Long-term nursing care
  • Sickness or disease that result from the accident
  • Compensation for loss of income
  • Funeral expenses

Here are some of the assets and structures the "property damage" portion covers:

  • Cars and other vehicles
  • Homes
  • Fences
  • Lampposts
  • Telephone poles

Not all liability policies cover the same costs or situations. Check with your insurance company to find out how fully your policy protects you. If you find that your policy is lacking, QuoteWizard can help find the right coverage.

A Note About “No-Fault” States and Liability Insurance

Twelve states (and Puerto Rico) require Personal Injury Protection coverage. With this coverage, each driver’s insurer pays, no matter who was at fault.

You can't ignore liability coverage if you live in one of those states. Say that you have an accident at a stoplight and injure the driver. That person's "no-fault" insurance pays the bills related to their injuries.  If it reaches its limit and there are bills left to be paid, you may have to pay them. They’ll be taken care of, though, if you have liability insurance.

If it reaches its limit and there are bills left to be paid, you may have to pay them. They’ll be taken care of, though, if you have liability insurance.

The Structure of Auto Liability Insurance

The numbers included on your liability policy might look strange. These are the "split limits" of your car insurance cvoverage, and they’re easy to decode.

Let’s use “50/100/25” as an example of liability coverage limits:

The first number represents $50,000. This is the max amount the insurer pays for one person’s injuries.

The second number represents $100,000. This is the amount paid to cover all injured in a single accident.

The third number represents $25,000 is how much it’ll pay to cover property damage

If your policy doesn’t have “split” figures, it's probably a single-limit policy. This kind of policy combines bodily injury and property damage coverage together.

So, if you cause an accident, it pays out no matter how many injuries or how much property is damaged. This depends on the coverage limits of your policy, of course.

How Liability Insurance Premiums are Calculated

The cost of liability coverage depends on many factors. Some of the ones insurers tend to consider:

  • Your driving record
  • How much coverage you want
  • Your marital status
  • Your gender
  • Your credit history

Not all insurance providers use credit history to calculate your rate. In fact, they’re not allowed to use it in some states.

Do you want a better deal on liability coverage? Compare quotes from multiple companies and find the best rates.

How Much Liability Insurance You Should Have

Most agents advise buying as much auto liability coverage as you can budget for. That's because the costs tied to car accidents escalate quickly. Even worse, they can go well past the minimum levels of liability coverage.

As a result, many agents and experts suggest buying these amounts:

  • Bodily injury coverage of at least $100,000 per person
  • Bodily injury coverage of $300,000 (or more) per accident
  • Property damage coverage of no less than $50,000

What if you want to buy a single-limit policy? Go with one that offers at least $300,000 of coverage.

Don’t worry if you must raise your coverage limits to meet these minimums. Doing so shouldn’t add much to your bill. In fact, you’ll only pay about 20 percent more to increase your limits from $100,000 to $300,000.

If your coverage won’t pay for all of a car accident, you could be sued for the remainder. To avoid this, buy as much liability insurance as you can afford.

Frequently Asked Questions About Liability Insurance

Q: Will my auto liability insurance cover me while driving a rental car?

A: Most of the time, yes, it will. There are exceptions to that rule, though. An example: your rental car is worth a lot more than your own car. In that case, your liability insurance may not fully cover the costs tied to an accident you cause.

If you use a credit card to pay for a rental car, that card may provide supplemental insurance. Some credit cards only offer collision coverage. That won’t protect you if you cause an accident that injures someone.

If you don't have comprehensive or collision insurance, your rental car may not be covered for theft or damage.

Q: Why is uninsured motorist coverage required by states that require auto liability insurance?

A: This is because many people ignore the laws requiring minimum liability coverage. In fact, the Insurance Research Council found 1 in 8 US drivers fail to buy liability insurance. It's almost impossible for police to track down and punish all of them. Some states require uninsured motorist coverage to address this problem.

Some states require uninsured motorist coverage so they'll be protected if they get into an accident.

Q: What is the difference between liability or liability-only and comprehensive?

A: Liability coverage only pays for damage that’s done to someone else’s body or property. Comprehensive coverage pays for damage done to your vehicle, as well as the theft of your vehicle.

Q: Does liability insurance cover a broken window?

A: Only if it’s part of someone else's car in an accident that you caused. Liability won’t cover window repair or replacement on your car. You're going to need comprehensive insurance if you want broken car windows repaired.

Q: Does liability insurance cover the contents of my car if someone breaks into it?

A: No. You need homeowners or renters insurance if you want to protect the contents of your car from theft.

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