In this article, we will take a look at and answer this question “What Is Liability Car Insurance?” and its role in protecting drivers from potential financial setbacks.
- Liability car insurance offers financial safety to drivers responsible for causing harm or property damage in an accident.
- It assists with medical bills through bodily injury liability.
- And, liability car also covers repair expenses for other vehicles affected in the mishap through property damage liability.
What Is Liability Car Insurance?
Liability car insurance primarily offers financial protection if you, as a driver, harm someone or damage their property. It doesn’t cover your own injuries or property damages; instead, other policy sections often cover that.
Comprising two main parts, bodily injury liability, and property damage liability, it ensures that third parties affected by your driving can receive compensation. Interestingly, every state, except for New Hampshire, mandates some level of this coverage for drivers.
What does Liability Car Insurance Cover?
Liability car insurance covers expenses when you’re at fault in an accident. It primarily breaks down into two components:
- Bodily injury liability addresses medical costs, lost wages, and even funeral expenses for others injured due to your driving
- Property damage liability compensates for damages to objects ranging from vehicles and fences to road signs and personal belongings.
Moreover, if you find yourself facing a lawsuit post-accident, this insurance can also shoulder your legal fees, ensuring both others and you are financially protected in unexpected events.
Understanding Liability Limits
Every liability auto insurance policy comes with specified limits, determining the maximum amount an insurer will pay for a claim. These coverage limits are categorized into three different categories, ensuring clarity and specificity in the event of a claim. This structure helps both the insurer and the insured understand the boundaries of their protection.
- Bodily injury per person
- Bodily injury per accident
- Property damage per accident
When examining an auto insurance policy, it’s common to encounter coverage limits displayed as a sequence of three numbers separated by slashes, like 25/50/25. In this example, a 25/50/25 liability policy outlines specific coverage amounts for various aspects:
- $25,000 in bodily injury coverage per person
- $50,000 in bodily injury per accident
- $25,000 in property damage per accident
Several insurance companies provide combined single limit (CSL) policies. With this setup, instead of having separate limits for each liability category, there’s a singular limit, like $300,000. This means all claims, whether for bodily injury or property damage, draw from this combined amount. If you’re looking to safeguard a significant amount of financial assets, transitioning to a CSL policy might be a wise move.
Liability Car Insurance Coverage Limits
Liability car insurance comes with set coverage amounts for its different components, based on the policy you select. These include:
This limit sets the maximum coverage for property damage. If costs go beyond this limit, the driver at fault must cover them.
Bodily Injury per Person
The per-person limit is the maximum amount the insurance will pay for each person injured in an accident.
Bodily Injury per Accident
The per accident liability limit is the total amount the insurance will pay for everyone injured in a single accident. If medical costs exceed this limit, the at-fault driver has to cover the extra expenses.
Who Needs Liability Insurance?
In the U.S., most states mandate drivers to have basic liability insurance, with the type and amount varying by state. However, even in states where you can opt out, if you’re financing your car, you might still need full coverage, including liability, comprehensive, and collision, until your loan is settled.
To figure out your specific requirements, it’s wise to check with your state’s Motor Vehicles or Insurance Department. Alternatively, consulting a local insurance agent can clarify the extent of liability coverage you need.
Example of Liability Car Insurance
In a state that doesn’t adopt the no-fault insurance system, consider a scenario where a driver holds a particular liability car insurance coverage with their insurance provider.
- Bodily injury liability limit per person of $60,000
- Bodily injury limit per accident of $150,000
The policyholder has an accident involving several individuals and is deemed responsible for the damages.
- Person A has medical costs totaling $30,000
- Person B has medical costs totaling $40,000
- Person C has medical costs totaling $50,000
In this scenario, the at-fault driver’s liability is covered because the medical expenses for each person involved in the accident were below $60,000. Furthermore, the combined cost for everyone, excluding the at-fault driver, amounted to $120,000, which stays within the per-accident bodily injury limit.
However, it’s vital to understand that some policies may not cover expenses exceeding the per-accident limit, even if individual costs are within the per-person threshold.
For instance, if each person had medical bills totaling $55,000, the collective amount would be $165,000, surpassing the $150,000 per-accident limit. Consequently, the at-fault driver would bear responsibility for the excess $15,000.
How Much Liability Car Insurance Do I Need?
When deciding on the liability insurance coverage you need, first check your state’s minimum requirements. This information can be sourced from your state’s Department of Motor Vehicles, their website, or a local licensed insurance agent. Additionally, consider your personal assets and potential financial obligations following a collision.
For instance, a minor accident might not dent your wallet much, but a major one could. Take Pennsylvania: its residents must have a minimum of $5,000 for property damage liability. So, if you cause an accident resulting in $15,000 worth of damage, you’d be on the hook for the extra $10,000.
Failing to pay might even land you in a lawsuit. Therefore, it’s wise to align your coverage with the value of your assets. Organizations like the Insurance Information Institute suggest getting liability insurance that sufficiently safeguards assets like your home and savings.
How Much Does Liability Insurance Cost?
According to a recent NerdWallet analysis, the national average for minimum car insurance, primarily consisting of liability and other state-required coverage, stands at $685 annually. However, if you have an at-fault accident on your record, this average rises to $1,044 per year. Additionally, for drivers with a recent DWI or DUI, the average cost for minimum coverage jumps to $1,403 annually.
Liability insurance costs differ based on several factors like the coverage limits chosen, your driving history, age, location, driving frequency, and your vehicle’s value.
To find a policy that fits both your needs and budget, it’s smart to shop around. Comparing online quotes from various insurers can guide you to the best or most affordable car insurance. Moreover, keep an eye out for discounts, as many insurers provide special offers to qualified drivers.
Liability vs. Full-Coverage Automobile Insurance
Beyond the mandatory liability coverage, insurance providers also offer collision and comprehensive insurance. When bundled together—liability, collision, and comprehensive—it’s often labeled as “full coverage.” Opting for this full-coverage policy does mean higher premiums than just a liability-only plan, but it also grants broader financial protection.
Here’s a simplified comparison between Liability and Full-Coverage Automobile Insurance:
Liability vs. Full-Coverage Automobile Insurance
|Covers damages to other people’s property and injuries.
|Covers both damages to other people’s property/injuries and your own property and injuries.
|Mandated by Law?
|Yes, in most states it’s the minimum required insurance.
|No, but may be required by lenders if you have an auto loan or lease.
|Generally cheaper because it offers limited coverage.
|Generally more expensive because it offers comprehensive protection.
|Protection Against Theft
|Yes, if you have comprehensive coverage.
|Protection Against Vandalism
|Yes, if you have comprehensive coverage.
|Protection for Own Vehicle
|Yes, through collision coverage.
|Medical Coverage for Self
|Yes, if personal injury protection or medical payments coverage is included.
|Protection from Uninsured/Underinsured Motorists
|Optional add-on in some policies.
|Typically included, but can vary based on the policy details.
Liability Car Insurance: FAQs
What does liability car insurance cover?
Auto liability insurance covers damages you’re responsible for when you cause a car accident. This encompasses injuries to other drivers and passengers as well as damages to other vehicles or public property. However, it’s important to note that this insurance doesn’t cover your personal expenses, such as your medical bills or repairs to your own vehicle.
Does auto liability insurance cover my car if someone hits me?
If another driver causes an accident that damages your car, their liability insurance usually covers your repairs. However, if they lack insurance, your collision coverage or uninsured motorist coverage might step in, provided you have these in your policy.
Do you need liability car insurance?
Indeed, almost every state mandates liability auto insurance for drivers. The exceptions are Virginia, where you can bypass this requirement by paying the state $500 annually, and specific remote areas in Alaska. Additionally, while each state determines its own minimum car insurance necessities, many also stipulate other insurance types.
How much liability car insurance do I need?
Certainly, the amount of insurance you need hinges on various factors. Firstly, you must meet your state’s mandated insurance requirements. Beyond that, if you have a higher net worth, you might consider more liability coverage to safeguard your assets against potential lawsuits. Additionally, if you’re financing or leasing your vehicle, your lender will likely necessitate comprehensive and collision insurance.
Is there a deductible for liability car insurance?
No, when it comes to liability insurance claims after a car accident, neither you nor any other involved party should face a deductible. Deductibles are typically tied to other types of coverage, like comprehensive, collision, uninsured motorist, and underinsured motorist coverage. So, in the realm of liability insurance, you’re usually free from such out-of-pocket expenses.
In essence, liability insurance is vital for drivers, covering damages they may inflict on others in accidents. While mandated by most states, it’s wise for individuals to evaluate their specific coverage needs. However, it’s crucial to remember that this insurance doesn’t address one’s own damages. Being knowledgeable about your policy ensures proper road protection.