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

Liability coverage pays others' costs when you cause an accident and protects your assets if you’re sued.

Andrew MarderApril 29, 2020
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What Liability Car Insurance Covers and How Much You Need

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Liability car insurance is the coverage that pays to repair the damage you cause to other people and their things. Liability just means “responsibility,” so liability insurance protects you when you’re responsible for bad accidents happening.

Your car insurance company makes a distinction between the people you might hurt and the things you might break. People are covered under bodily injury liability coverage, while things fall under property damage. When you’re buying car insurance, you’ll be able to set different limits (the maximum amounts your company will pay out for a claim) for both these types of coverage.

You’ll likely need some of both, as every state in the U.S. — except New Hampshire — requires liability coverage of some sort. The amount you need will vary by state and your financial situation, but you can check your state’s requirements below or talk to a local insurance company to make sure you’ve got the coverage you need.

What is liability car insurance?

Liability car insurance is designed to pay for expenses when you cause an accident, but it can come up short. Medical bills and car repairs can be incredibly expensive, and a split second could be the difference between a normal day and the beginning of bankruptcy.

Important note — your liability insurance does not cover the cost to repair your own car or pay your medical bills. This is coverage designed to pay others for the damage you cause behind the wheel. By covering some or all of the costs associated with an accident, liability coverage acts as a buffer between an accident and financial ruin.

There are three main limits of liability insurance in an auto policy, which you’ll often see summarized by three numbers. For example, you may see something like “30/60/15” as your state’s minimum coverage.

The first number (“30” in the example above, standing for $30,000) is the maximum your insurance will pay for injuries to a single person after an accident.

The second number (“60” above, meaning $60,000) is the maximum for injuries to everyone you hurt in the accident — this doesn’t include injuries you may have, which are covered by a different type of insurance. The per accident maximum comes into play if there are multiple people injured in an accident.

The final number (“15” above, $15,000) represents the maximum amount your insurance company will pay for property damage you cause. That includes damage to cars, buildings or anything else that isn’t a person.

One distinction to remember — while bodily limits have a per person limit, property damage liability has only a per accident limit. If you hit three cars, the total your insurance will pay will be represented by that final number ($15,000 in this example).

What liability auto insurance covers

The two parts of liability insurance cover a wide range of potential costs. Bodily injury liability insurance helps pay for medical bills an injured person may run up. It can also pay for recovery treatments or other ongoing costs.

On top of that, if you injure someone and they sue you, liability insurance can cover lawyers’ bills or court fees. Finally, it can pay for claims of lost wages. Without liability insurance, you would be responsible for all of those costs yourself.

Property damage is a similar story. If you hit a car, it can pay for repairs and rental cars. If you run into a building, it can pay for any restorations.

Property can also include the things in a person’s vehicle. If you get in a little fender bender, but the other driver had $4,000 worth of crystal in the trunk, your property damage liability insurance will cover the replacement — and the new bumper.

Do you need liability car insurance?

In a word, yes. Every state except New Hampshire requires drivers to have liability insurance (though Virginia waives the liability requirement if you pay the state $500). Each state sets its own minimum coverage levels, and many require additional types of insurance (see table below).

State regulators put these requirements in place to protect drivers. If you’re in an accident and another driver is at fault, you should be able to get back up and running quickly. Liability insurance makes this possible.

Keep in mind, state-mandated minimums are just that — minimums. They aren’t recommended coverage levels or even default levels. It’s the insurance equivalent of a PG-13 movie rating. You need to be 13 to get in, but that doesn’t mean a 27-year-old won’t still be terrified, offended or sickened. Your tolerance beyond the bare minimum is up to you.

How much liability insurance do you need?

Liability car insurance is designed to protect your finances when you cause an accident. In some ways, it’s an odd piece of “car” insurance because your car isn’t the thing you’re really trying to insure. Instead, you want insurance to cover you and your assets, if you’re found to be at fault for a bad accident.

How much liability insurance you need depends on your net worth. Start with a worst case scenario and work backward.

You hit another car, total it and seriously injure four people. If you’re at fault, you’ll be responsible for the value of the car and the medical bills of all four passengers. Now, you’re looking at $500,000 of bills to pay. Can your liability insurance pay for them? If you don’t have enough coverage — that is, if your limits aren’t that high — you’ll be personally responsible for any excess.

The people you injured can sue you for that money if you can’t or won’t pay. You could end up losing your home or, in some states, having your wages garnished. The more you have to lose, the more they can come after.

State minimums for liability insurance may not cover the value of all your assets. Remember liability insurance is designed to protect your financial safety, so having more coverage can keep your savings, home and wages safe if the worst was to happen.

As a general rule of thumb, you can determine the absolute maximum coverage you would need by figuring out your net worth. That’s just the value of all the cash you have and things you own, minus your debt.

If you don’t have much stuff, there’s no incentive to sue you, and you may not need any additional coverage. You may also have a higher risk tolerance. Additional liability coverage isn’t free, and maybe you’ll decide the extra money in your pocket is worth more than the peace of mind from extra coverage.

State minimum liability insurance requirements

State

Requirements

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident

$50,000 bodily injury liability per person $100,000 bodily injury liability per accident $25,000 property damage liability per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $15,000 property damage liability per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident

$15,000 bodily injury liability per person $30,000 bodily injury liability per accident $5,000 property damage liability per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $15,000 property damage liability per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident $25,000 uninsured/underinsured motorist coverage per person $50,000 uninsured/underinsured motorist coverage per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $10,000 property damage liability per accident $15,000 personal injury protection per person $30,000 personal injury protection per accident

$10,000 property damage liability per accident $10,000 personal injury protection

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident

$20,000 bodily injury liability per person $40,000 bodily injury liability per accident $10,000 property damage liability per accident $10,000 personal injury protection

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $15,000 property damage liability per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $20,000 property damage liability per accident $25,000 uninsured motorist coverage per person $50,000 uninsured motorist coverage per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident

$20,000 bodily injury liability per person $40,000 bodily injury liability per accident $15,000 property damage liability per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident $25,000 uninsured/underinsured motorist coverage per person $50,000 uninsured/underinsured motorist coverage per accident Personal injury protection including $4,500 in medical expenses, up to $900 per month for a year for disability or loss of income, $25 per day for in-home services, $2,000 for funeral burial or cremation costs, and $4,500 for rehabilitation Survivors benefits including up to $900 per month for a year for disability or loss of income and $25 per day for in-home services

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident

$15,000 bodily injury liability per person $30,000 bodily injury liability per accident $25,000 property damage liability per accident

$50,000 bodily injury liability per person $100,000 bodily injury liability per accident $25,000 property damage liability per accident $50,000 uninsured/underinsured motorist coverage per person $100,000 uninsured/underinsured motorist coverage per accident $2,000 medical payments coverage

$30,000 bodily injury liability per person $60,000 bodily injury liability per accident $15,000 property damage liability per accident $30,000 uninsured/underinsured motorist coverage per person $60,000 uninsured/underinsured motorist coverage per accident $15,000 uninsured/underinsured property damage coverage per accident

$20,000 bodily injury liability per person $40,000 bodily injury liability per accident $5,000 property damage liability per accident $20,000 uninsured motorist coverage per person $40,000 uninsured motorist coverage per accident $8,000 personal injury protection

$50,000 bodily injury liability per person $100,000 bodily injury liability per accident $10,000 property damage liability per accident outside Michigan $1 million property protection within Michigan $250,000* personal injury protection

*Lower PIP limits available for certain Medicare and Medicaid recipients

$30,000 bodily injury liability per person $60,000 bodily injury liability per accident $10,000 property damage liability per accident $25,000 uninsured/underinsured motorist coverage per person $50,000 uninsured/underinsured motorist coverage per accident $40,000 personal injury protection

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident $25,000 uninsured motorist coverage per person $50,000 uninsured motorist coverage per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $20,000 property damage liability per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident $25,000 uninsured/underinsured motorist coverage per person $50,000 uninsured/underinsured motorist coverage per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $20,000 property damage liability per accident

(Minimum limits if driver purchases car insurance, which is optional.) $25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident $25,000 uninsured/underinsured motorist coverage per person $50,000 uninsured/underinsured motorist coverage per accident $25,000 uninsured/underinsured motorist property damage coverage $1,000 medical payments coverage

(Basic policy) $5,000 property damage liability per accident $15,000 personal injury protection

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $10,000 property damage liability per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $50,000 liability for death per person $100,000 liability for death per accident $10,000 property damage liability per accident $25,000 uninsured motorist bodily injury coverage per person $50,000 uninsured motorist bodily injury coverage per accident $50,000 personal injury protection

$30,000 bodily injury liability per person $60,000 bodily injury liability per accident $25,000 property damage liability per accident $30,000 uninsured motorist coverage per person $60,000 uninsured motorist coverage per accident $25,000 uninsured motorist property damage coverage per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident $25,000 uninsured/underinsured motorist coverage per person $50,000 uninsured/underinsured motorist coverage per accident $30,000 personal injury protection

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $20,000 property damage liability per accident $25,000 uninsured motorist coverage per person $50,000 uninsured motorist coverage per accident $15,000 personal injury protection

$15,000 bodily injury liability per person $30,000 bodily injury liability per accident $5,000 property damage liability per accident $5,000 medical benefits

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident $25,000 uninsured motorist coverage per person $50,000 uninsured motorist coverage per accident $25,000 uninsured motorist property damage coverage

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident $25,000 uninsured/underinsured motorist coverage per person $50,000 uninsured/underinsured motorist coverage per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $15,000 property damage liability per accident

$30,000 bodily injury liability per person $60,000 bodily injury liability per accident $25,000 property damage liability per accident

$25,000 bodily injury liability per person $65,000 bodily injury liability per accident $15,000 property damage liability per accident $3,000 personal injury protection

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $10,000 property damage liability per accident $50,000 uninsured/underinsured motorist coverage per person $100,000 uninsured/underinsured motorist coverage per accident $10,000 uninsured/underinsured motorist property damage coverage per accident

(Minimum limits if a driver purchases car insurance, which is optional. Drivers who don’t purchase insurance pay a $500 fee.) $25,000 bodily injury liability per person $50,000 bodily injury liability per accident $20,000 property damage liability per accident $25,000 uninsured/underinsured motorist coverage per person $50,000 uninsured/underinsured motorist coverage per accident $20,000 uninsured/underinsured motorist property damage coverage per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $10,000 property damage liability per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $10,000 property damage liability per accident $25,000 uninsured motorist coverage per person $50,000 uninsured motorist coverage per accident $5,000 uninsured motorist property damage coverage per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $25,000 property damage liability per accident $25,000 uninsured motorist coverage per person $50,000 uninsured motorist coverage per accident $25,000 uninsured motorist property damage coverage

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $10,000 property damage liability per accident $25,000 uninsured motorist coverage per person $50,000 uninsured motorist coverage per accident

$25,000 bodily injury liability per person $50,000 bodily injury liability per accident $20,000 property damage liability per accident

What is an umbrella insurance policy?

You may discover that your car insurance company doesn’t have a policy with limits high enough to cover all your risk. That’s because car insurers have limits as to how much they’re willing to protect under a normal policy.

If you think you’ll need even more coverage than your auto insurer will provide you, you might need an umbrella policy. Umbrella policies expand auto and home liability insurance beyond the normal limits provided by your insurer.

Umbrella insurance policies usually cover your home and your cars. They also add new kinds of coverage to those policies. Instead of covering just accidents, you’ll also often get coverage for being sued for things like libel, dog attacks and injuries sustained on your property.

If those don’t sound like problems you’re likely to encounter, umbrella insurance probably isn’t for you. In general, umbrella policies cover those who have a lot of assets or who have more opportunities to encounter risk. If you host lots of parties, have an easily accessible pool, keep a bunch of dogs or have rental properties, you might have the sort of risk an umbrella policy is meant to cover.

These policies also often extend to liabilities overseas, which can make them attractive to frequent travelers. If you think any of these situations might apply to you, you can learn more about umbrella insurance policies.

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