Auto Liability Insurance Explained
Last Updated on September 15, 2023
Auto liability insurance is the type of car insurance coverage that covers the other party’s expenses in an accident you are responsible for. If you cause an accident, for example, your liability coverage will pay to fix the other driver’s vehicle. If there are medical bills, liability coverage will also pay for those.
Liability coverage is required by law in most states. It consists of two main components – bodily injury liability coverage and property damage liability coverage.
Below, we’re learning everything you need to know about automobile liability coverage. Continue reading to learn all about auto liability insurance, including what it covers, what it consists of, whether or not you need it, and if it is legally required in your state.
- Auto liability insurance covers the other party’s expenses in accidents you’re at fault for, including their vehicle repairs and medical bills.
- There are two main components of liability coverage: bodily injury liability and property damage liability.
- While liability coverage is mandatory in most states, the minimum required amounts might not cover all accident-related expenses.
- It’s recommended to consider higher liability coverage limits than the state minimum to ensure adequate financial protection.
- What Is Auto Liability Insurance?
- Bodily Injury Liability Coverage Explained
- Property Damage Liability Coverage Explained
- What Else Can Liability Insurance Cover?
- What Doesn't Liability Insurance Cover?
- Minimum Liability Insurance Requirements by State
- The Importance of Liability Coverage
- How Much Liability Coverage Should You Get?
- Final Word on Liability Coverage
What Is Auto Liability Insurance?
Liability coverage is the most basic coverage type in all auto insurance policies. Liability insurance is also a key part of any full coverage plan you may get. Liability insurance coverage is not the portion of your insurance that covers your own injuries or property loss. It is instead used for the medical bills of accident victims or to replace the vehicle or any other property that may have been damaged in an accident you are at fault for.
Liability insurance is usually provided in two parts – bodily injury liability coverage and property damage liability coverage. Bodily injury liability coverage covers injuries that are physically caused to other people, and property damage liability coverage, as the name implies, covers damage that is caused to the property of that person or persons. In some cases, your coverage may be required to cover multiple people who have been hospitalized or to replace more than one vehicle. In others, the damage may only be to property, such as a mailbox or light pole, or to cover minor collision repairs. Most states require liability insurance coverage as the absolute minimum allowed by law. Continue reading below to learn more about these two types of liability coverage.
Bodily Injury Liability Coverage Explained
As stated above, bodily injury liability auto insurance covers your financial responsibility for the other driver’s medical costs. Typically, policies cover the policyholder anywhere in the United States and will also cover someone who borrows his or her car with permission. Bodily injury liability is an important aspect of your auto insurance policy because medical expenses can run sky-high, especially when pain and suffering damages are added.
Bodily injury liability is not the area to try and save money on your premium (your insurance payment). Due to the high cost of medical bills, it may be wise to purchase more than the state-mandated minimum of bodily injury coverage. If the other motorist, or his or her passenger(s), incur injury expenses that exceed your policy’s coverage, you can be sued for the additional amount. If you own a home or have sizable financial savings, it is a good idea to protect your investments with adequate bodily injury coverage.
Property Damage Liability Coverage Explained
As previously mentioned, property damage auto insurance covers the costs of damages to the other driver’s vehicle should you be involved in an auto accident. Typically, it also covers the damage done to another vehicle by someone driving your car with your permission.
While, generally, it is another vehicle that would be damaged if you were to be involved in a collision, property damage liability also covers damage done to lamp posts, telephone poles, fences, buildings, or other structures you may crash into.
What Else Can Liability Insurance Cover?
Your car insurance provider also offers additional coverage beyond the standard policy limits for certain expenses related to an accident. These include, but are not limited to:
- Legal defense costs, such as attorney fees
- Bail bonds
- Bonds for appeals
- Security bonds
- Interest accrued on court judgments
- Expenses borne by the policyholder in defense, including missed earnings
What Doesn’t Liability Insurance Cover?
Liability coverage will only pay for damages to the other party that you are ruled at fault or liable for. Here are some things that liability coverage won’t pay for:
- Damage to your own vehicle after an accident – Collision coverage pays for that. (or the other party’s liability coverage)
- Damage to your own vehicle from weather or natural disasters – Comprehensive coverage pays for that.
- Damage to your vehicle after it was stolen or vandalized – Comprehensive coverage pays for that.
- Your own injuries after an accident – Medical payments coverage, personal injury protection, or health insurance pays for that. (or the other party’s liability coverage)
- Towing and labor costs – Roadside assistance coverage pays for that.
- Rental car costs after an accident – Rental car reimbursement coverage pays for that. (or the other party’s liability coverage)
Minimum Liability Insurance Requirements by State
When purchasing an auto insurance policy, liability insurance is often represented by three numbers, such as 50/100/25. This is called a “split limit” and is broken down in the following way:
- 50 represents $50,000 of single-person bodily injury liability (BI per person limit)
- 100 indicates $100,000 total will be paid towards all injuries combined (BI per accident limit)
- 25 stands for $25,000 in total property damage coverage (PD per accident limit)
You can also buy liability insurance in a combined single limit (CSL), which gives you a single amount of coverage to use to cover the expenses from an accident. CSL policies, however, are more expensive.
Minimum Requirements in Your State
- Alaska 50/100/25
- Alabama 25/50/25
- Arkansas 25/50/25
- Arizona 15/30/10
- California 15/30/5
- Colorado 25/50/15
- Connecticut 20/40/10
- Delaware 15/30/10
- Florida 10/20/10
- Georgia 25/50/25
- Hawaii 20/40/10
- Idaho 20/50/15
- Illinois 20/40/15
- Indiana 25/50/10
- Iowa 20/40/15
- Kansas 25/50/10
- Kentucky 25/50/10
- Louisiana 15/30/25
- Maine 50/100/25
- Maryland 30/60/15
- Massachusetts 20/40/5
- Michigan 20/40/10
- Minnesota 30/60/10
- Mississippi 25/50/25
- Missouri 25/50/10
- Montana 25/50/10
- Nebraska 25/50/25
- New Hampshire 25/50/25 (only if you decide to buy an insurance policy)
- New Jersey 15/30/5
- New Mexico 25/50/10
- Nevada 15/30/10
- New York 25/50/10
- North Carolina 30/60/25
- North Dakota 25/50/25
- Ohio 12.5/25/7.5
- Oklahoma 25/50/25
- Oregon 25/50/20
- Pennsylvania 15/30/5
- Rhode Island 25/50/25
- South Carolina 25/50/25
- South Dakota 25/50/25
- Tennessee 25/50/15
- Texas 30/60/25
- Utah 25/65/15
- Virginia 25/50/20
- Vermont 25/50/10
- Washington 25/50/10
- Wisconsin 50/100/55
- West Virginia 20/40/10
- Wyoming 25/100/15
As you can see, liability coverage is required in all states except for New Hampshire. If you live in NH, however, and want to purchase an insurance policy, you must get at least 25/50/25 in coverage.
The Importance of Liability Coverage
With today’s rising healthcare costs, a hundred thousand dollars of liability coverage may not even be close to enough to cover medical costs, especially if more than one person has been seriously injured. According to the NHTSA, the average medical bill from car accident injuries is around $15,000.
Remember that any difference between your insurance coverage and the total amount will be your responsibility to pay. Having inadequate coverage could, without exaggeration, cause financial ruin, up to and including losing your home to pay for the medical bills of others. Obviously, this is a situation we would all want to avoid, which is why most states require it as minimum coverage.
You must understand that this coverage does not include the policyholder but is instead applied to injuries to other people or their property for which the policyholder may be held responsible. As you see, liability insurance can be the difference between getting over a nasty accident and moving on or having such an accident and facing financial ruin.
How Much Liability Coverage Should You Get?
Even though most states have a minimum liability insurance coverage that you must have, it is strongly recommended that you obtain higher coverage since the minimum may be used up before the costs incurred in an accident are absolved. Personal finance advisor Dave Ramsey recommends that all drivers carry at least $500,000 in liability coverage.
It is very much in your best interest to pay slightly higher premiums for more comprehensive liability insurance protection than to find that you have left yourself short of having enough insurance to cover your liabilities to victims of an accident.
Final Word on Liability Coverage
Liability coverage pays for the damages to the other driver you are deemed at fault for after an accident. It consists of property damage liability coverage and bodily injury liability coverage.
Liability coverage is legally required in almost every state in the United States. Each state has its own minimum liability limits that you must adhere to when purchasing a policy.
While the state limit will keep you legal on the road, it might not be enough coverage. Remember that the more liability coverage you purchase, the less you will be responsible for paying out-of-pocket. Most insurance providers have suggested coverage amounts, so if you are unsure about how much liability coverage to purchase, speak with your agent for a more informed recommendation.