Liability Car Insurance: What It Covers and How Much You Need

“Liability” is just another word for responsibility. So, if you’re ever found at-fault after an accident, whether you crash into another car, a pedestrian or plow down your neighbor's picturesque picket fence, you’re legally responsible (or liable) to pay for the damages you cause. With car liability insurance, your insurer foots the bill on your behalf. 

But auto liability insurance is not always cut and dry, and figuring out how much you need can be a challenge. Here’s a closer look at:

• What liability car insurance covers (and what it doesn’t).

• What you need to know about “limits.”

• How much car liability insurance you need.

• How much it costs.

What does liability car insurance cover?

Liability insurance is the part of your auto policy that pays for other people’s expenses when you cause an accident. It has two main components:

• Bodily injury liability. This pays other people’s costs when they’re injured in a traffic-related accident you cause. It covers things like medical bills, pain and suffering, lost wages and even funeral costs.

• Property damage liability. This pays others’ costs when their property is damaged in a traffic-related accident you cause. This can range from cars and fences to buildings and government infrastructure, like guardrails and road signs. It may even pay for other people’s personal belongings and a rental car for the other driver.

Beyond other people’s injuries and property damage, liability car insurance can also cover your own lawyers’ bills or court fees if you’re sued after an accident.

» MORE: What does car insurance cover?

What does liability car insurance not cover?

Liability auto insurance won’t pay for you or your family’s medical bills or repairs to your car — it’s only designed to pay others for the damage you cause behind the wheel.

To cover your own bills, you’ll need to rely on other types of insurance, such as personal injury protection or health insurance for your medical expenses and collision insurance for repairs to your vehicle. 

Liability car insurance limits

Car liability insurance pays only up to the maximum amounts, or “limits,” specified in your policy. If damage from an accident exceeds those limits, you may be responsible to pay for the rest.

Most auto policies have three main liability limits, which are often displayed as three numbers on your policy. For example, you may see something like “25/50/25” on your car insurance declaration page. Here’s how to interpret that:

• Bodily injury liability limit per person. The first number is the maximum your insurance will pay for injuries to a single person after an accident. (In the example above, “25” stands for $25,000.)

• Bodily injury liability limit per accident. The second number is the maximum for injuries to everyone you hurt in the accident — except for you or anyone in your household. The per-accident maximum comes into play if there are multiple people injured in an accident. (This is the “50” above, meaning $50,000.)

• Property damage liability limit per accident. The final number represents the maximum amount your insurance company will pay for total property damage you cause. That includes damage to cars, buildings or anything else that isn’t a person. (“25” above means $25,000.)

» MORE: Compare car insurance

How much liability car insurance do you need?

Nearly every state requires at least some liability coverage (or proof you have enough cash on the side to pay for damages yourself). The only exceptions are rural parts of Alaska without requirements and Virginia, where residents can waive liability coverage if they pay the state $500 annually. Here’s a list of all state minimum car insurance requirements. 

While many states have low liability limit requirements, you may want a higher limit to protect your savings and other financial assets if you cause an accident. Medical bills and car repairs can be incredibly expensive, and if you’re found at-fault you’ll be responsible for the balance. A split second could be the difference between a normal day and the beginning of bankruptcy.

For example, say 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, medical bills of all four passengers and any damage to the roadway. Now, you’re looking at paying almost $500,000 in medical bills and another $50,000 for the car and damaged roadway. Do you have enough liability auto insurance to pay for those costs?

If you don’t have enough coverage — that is, if your bodily injury and property damage limits aren’t that high, respectively — you can be held personally responsible for any excess. The people you injured can sue you for that money, and you could end up losing your home or, in some states, having your wages withheld. The more you have to lose, the more they can come after.

» MORE: How much car insurance do you really need?

Need more auto liability insurance? Grab an umbrella

Your car insurance company might not allow liability limits high enough to cover all your assets — many auto insurers have a maximum bodily injury limit of $500,000 or lower.

If you think you’ll need more liability coverage than your auto insurer will provide, consider umbrella insurance. Umbrella policies expand auto and home liability insurance beyond your carrier’s normal limits.

In general, umbrella policies cover those who have a lot of assets or more opportunities to encounter risk. You might have the sort of risk an umbrella policy is meant to cover if you:

• Host lots of parties.

• Have a swimming pool, trampoline or other feature that could be considered an “attractive nuisance.”

• Own one or more dogs. Depending on the breed of your dog, your insurer may not cover your animal.

• Own boats, RVs, multiple homes or rental properties.

How much does car liability insurance cost?

The national average car insurance cost of minimum car insurance, which typically includes liability auto insurance and other state-mandated coverage, is $685 per year, according to a recent NerdWallet rate analysis. This rate goes up to $1,044 per year, on average, if you have an at-fault accident on your record. For drivers who have a recent DWI or DUI, minimum coverage costs $1,403, on average.

Car insurance rates vary widely by state and are also influenced by things like your age, your personal driving history, the make and model of car and, in some states, your credit score.

» MORE: How much does liability-only car insurance cost?