Liability car insurance definition and basics
Liability insurance coverage protects other drivers from bodily injury or property damage you might cause in an at-fault accident. Liability insurance is also known as third-party insurance. We'll review liability insurance thoroughly in the following guide, answering the following questions:
- What does liability insurance cover?
- How much liability auto insurance should you have?
- How much does liability car coverage cost?
Liability coverage is defined by two key coverages: bodily injury and property damage liability. The amount of liability coverage you carry depends on personal preference and laws in your state. Because car insurance is regulated at the state level, each state sets minimum policy limits for liability coverage.
Basic liability car insurance options look like this:
| 50 / | 100 / | 50 |
|---|---|---|
| $50,000 in bodily injury coverage per person | $100,000 in bodily injury coverage per incident | $50,000 in property damage per incident |
Liability coverage for bodily injury
Bodily injury (BI) liability coverage pays for others' injuries, pain and suffering, lost wages and other expenses for which you may be deemed liable after a vehicle collision. If you are found to be legally liable for injuries caused in an on-road incident, BI liability insurance could help you cover costs such as:
- Medical costs caused by injuries
- Emotional and physical pain or suffering
- Wages lost or diminished earning capacity caused by accident
Liability coverage for property damage
Property damage (PD) liability coverage pays for damage to another person's property or any loss-of-use costs for which you're found liable. Property damage liability coverage helps to cover expenses like:
- Vehicle damage and repairs
- Repair of damaged structures
- Debris removed as a result of an incident (trees, signage, etc.)
Types of liability insurance
Most large auto insurance companies in America offer a variety of liability insurance coverage options. These commonly include:
- Commercial auto insurance. For company vehicles, a commercial auto insurance policy may be necessary to cover gaps a personal policy does not cover. Commercial insurance policies offer additional liability coverage for business vehicles such as trucks and transportation vehicles. A commercial auto insurance policy would be useful in a situation where an employee backs into another vehicle on a job site.
- Business owners policy (BOP). A BOP is similar to a Commercial Auto Insurance policy but offers additional property protections. This policy can help to cover store merchandise or equipment, expenses caused by business interruption, and on-property injury costs. If a hurricane were to destroy your shop, a BOP could help cover the cost of repairs and offer employees some compensation while the business is interrupted.
- Professional liability insurance (errors and omissions insurance). This type of policy covers costs stemming from lawsuits for professional errors. These include being sued for negligence or giving bad professional advice.
What doesn't liability insurance cover?
While liability insurance is mandatory in most states, it’s not the only coverage you should carry.
Some things aren't covered by liability insurance:
- Collision Coverage: If you drive a valuable vehicle, i.e., worth more than $4,000, consider adding this coverage to protect your vehicle from damage by striking a fixed object (such as a wall or another vehicle)
- Comprehensive Coverage: Usually paired with collision coverage, comprehensive coverage protects your vehicle from incidents not covered by collision coverage. This includes theft, vandalism, or animal damage.
- Uninsured/Underinsured Motorist Coverage: This coverage protects you and your vehicle from damage done by a driver without insurance — or someone with insufficient insurance. Like liability coverage, it is broken down into property damage and bodily coverage options. This coverage can also apply if you're injured by a hit-and-run driver.
- Personal Injury Protection (PIP): This add-on provides assistance for medical expenses and work-loss coverage after an accident, independent of fault. If you don’t have health insurance, PIP is worth considering. This insurance policy is commonly coupled with no-fault insurance.
How much liability insurance do you need?
Each state has its own mandatory liability insurance minimums. While we’ve listed mandatory minimum liability insurance by state at the end of this section, it's often a good idea to carry more than the minimum. Although you might save a few bucks by dropping coverage, it's not recommended to maintain a low level of liability car insurance coverage because:
- You are responsible for any remaining damage not covered by your insurance
- You appear as high-risk to insurance companies
You’re responsible for damages not covered by your property damage liability coverage:
Because some states have very low liability limits, you end up being responsible for any damage not covered by your insurance. Let's say you’re a California resident who totals another driver's 2019 Ford F150 — listed at $28,155 — in an at-fault accident. In California, mandatory minimum liability car insurance covers $5,000. You would be responsible for the remaining $23,155. Depending on your financial situation, this could be a tricky hole to climb out of without sufficient levels of property damage liability coverage.
You appear as a risk to insurance companies:
Carrying your state’s minimum liability coverage not only leaves you on the hook for any damages left over from a claim, but also stands out as a red flag for insurers. If you elect to carry high liability limits, you shoulder some of the insurance company's financial responsibility and risk. If you carry the bare minimum liability car insurance, you pass more risk along to the insurer — leading to more expensive premiums, in many cases.
| 6mo with State Min Bi Limits | 6-mo with 50/100 Bi Limits | 6-mo with 100/300 Bi Limits |
|---|---|---|
| $1,568 | $1,495 | $1,465 |
To avoid higher rates, consider keeping your liability coverage at 100/300/100, if possible.
How much does liability car insurance cost?
The price of liability insurance depends on several factors. Based on the US average with a standard vehicle and driving profile, the cost difference between minimum liability limit coverage and "full coverage" is approximately $180 per year.
| State Minimum | 50/100 Limits | 100/300 Limits |
|---|---|---|
| $581 | $672 | $761 |
While your liability coverage comprises half of your premium if you also carry collision and comprehensive coverage, there’s less difference between common liability limits.
State-by-state minimum liability limits
State | Bodily Injury: Per Person | Bodily Injury: Per Accident | Property Damage |
|---|---|---|---|
| Alabama | $25,000 | $50,000 | $25,000 |
| Alaska | $50,000 | $100,000 | $25,000 |
| Arizona | $15,000 | $30,000 | $10,000 |
| Arkansas | $25,000 | $50,000 | $25,000 |
| California | $15,000 | $30,000 | $5,000 |
| Colorado | $25,000 | $50,000 | $15,000 |
| Connecticut | $20,000 | $40,000 | $10,000 |
| Delaware | $15,000 | $30,000 | $10,000 |
| Florida | — | — | $10,000 |
| Georgia | $25,000 | $50,000 | $25,000 |
| Hawaii | $20,000 | $40,000 | $10,000 |
| Idaho | $25,000 | $50,000 | $15,000 |
| Illinois | $25,000 | $50,000 | $20,000 |
| Indiana | $25,000 | $50,000 | $10,000 |
| Iowa | $20,000 | $40,000 | $15,000 |
| Kansas | $25,000 | $50,000 | $25,000 |
| Kentucky | $25,000 | $50,000 | $25,000 |
| Louisiana | $15,000 | $30,000 | $25,000 |
| Maine | $50,000 | $100,000 | $25,000 |
| Maryland | $30,000 | $60,000 | $15,000 |
| Massachusetts | $20,000 | $40,000 | $5,000 |
| Michigan | $20,000 | $40,000 | $10,000 |
| Minnesota | $30,000 | $60,000 | $10,000 |
| Mississippi | $25,000 | $50,000 | $25,000 |
| Missouri | $25,000 | $50,000 | $10,000 |
| Montana | $25,000 | $50,000 | $10,000 |
| Nebraska | $25,000 | $50,000 | $25,000 |
| Nevada | $15,000 | $30,000 | $10,000 |
| New Hampshire | $25,000 | $50,000 | $25,000 |
| New Jersey | $15,000 | $30,000 | $5,000 |
| New Mexico | $25,000 | $50,000 | $10,000 |
| New York | $25,000 | $50,000 | $10,000 |
| North Carolina | $30,000 | $60,000 | $25,000 |
| North Dakota | $25,000 | $50,000 | $25,000 |
| Ohio | $25,000 | $50,000 | $25,000 |
| Oklahoma | $25,000 | $50,000 | $25,000 |
| Oregon | $25,000 | $50,000 | $20,000 |
| Pennsylvania | $15,000 | $30,000 | $5,000 |
| Rhode Island | $25,000 | $50,000 | $25,000 |
| South Carolina | $25,000 | $50,000 | $25,000 |
| South Dakota | $25,000 | $50,000 | $25,000 |
| Tennessee | $25,000 | $50,000 | $15,000 |
| Texas | $30,000 | $60,000 | $25,000 |
| Utah | $25,000 | $65,000 | $15,000 |
| Vermont | $25,000 | $50,000 | $10,000 |
| Virginia | $25,000 | $50,000 | $20,000 |
| Washington | $25,000 | $50,000 | $10,000 |
| Washington DC | $25,000 | $50,000 | $10,000 |
| West Virginia | $20,000 | $40,000 | $10,000 |
| Wisconsin | $25,000 | $50,000 | $10,000 |
| Wyoming | $25,000 | $50,000 | $20,000 |