Liability car insurance is coverage that pays to repair the damage you cause to other people and their things. Liability just means “responsibility,” so liability insurance pays out when you’re responsible for an accident.
There are two types of liability insurance — bodily injury liability coverage and property damage liability coverage — and most states require you to have both. Here’s the difference between the two and how much liability auto insurance you need.
What is liability car insurance?
Liability coverage is the part of your auto policy that pays for expenses when you cause an accident. It has two main components:
Bodily injury liability coverage
This coverage pays out if you hurt other people in a car accident that’s your fault. Bodily injury liability coverage, or BI, typically covers things like medical expenses, recovery treatments and lost wages if someone can’t work while they’re recovering. It could also cover funeral costs after a fatal accident.
Property damage liability coverage
This coverage, sometimes abbreviated PD, pays for damage you cause to vehicles or other property when you’re at fault for an accident. For example, it could pay to repair the other driver’s car or to replace a fence you crashed into.
Property damage liability coverage can also include the things in a person’s vehicle. Say you get in a little fender bender, but the other driver had $4,000 worth of crystal in the trunk that is now sparkly rubble. Your property damage liability insurance will cover the replacement — and the new bumper.
Beyond injuries and property damage, liability car insurance can also cover lawyers’ bills or court fees if you’re sued after an accident.
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Liability car insurance limits
Liability coverage will pay only up to the maximum amounts specified in your policy, or limits. If damage from an accident exceeds those limits, you’ll have to pay the rest yourself.
Split liability limits
Most auto policies have three main liability limits, which are often summarized by three numbers. For example, you may see something like “30/60/15” as your state’s required minimum coverage. 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 (“30” in the example above, standing for $30,000).
Bodily injury liability limit per accident. The second number is the maximum for injuries to everyone you hurt in the accident — not including your own injuries. The per-accident maximum comes into play if there are multiple people injured in an accident. (This is the “60” above, meaning $60,000.)
Property damage liability limit per accident. The final number 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 (“15” above, $15,000).
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), and you’ll be responsible for the rest.
Combined single limit liability
An alternative to split limit liability coverage is one larger liability limit to cover both bodily injury and property damage. The flexibility of combined single limit liability means more financial protection than split limit coverage in many cases.
For example, let’s compare the split liability limit above (30/60/15) with a combined single limit of $60,000. Say you injured two people in an accident, and one required $10,000 worth of treatment while the other required $50,000. Under the split liability limit, you’d have to pay $20,000 for the second person’s injuries because their treatment exceeded your policy’s per-person maximum. But with a combined $60,000 liability limit, all treatment would be covered.
Combined single limit liability may cost more than split limits.
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What liability auto insurance doesn’t cover
Liability auto insurance won’t pay for your own 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 health insurance for your medical expenses and collision insurance for repairs to your vehicle.
Do you need liability car insurance?
In a word, yes: Almost all car insurance policies must include some liability coverage. Every state except Alaska, New Hampshire and Virginia requires all drivers to have liability insurance. (Virginia waives the liability requirement if you pay the state $500, and Alaska exempts some residents from its mandatory minimums.) Each state sets its own minimum coverage levels, and many require additional types of insurance (see table below).
These requirements are in place to protect drivers who aren't at fault in a wreck. 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.
State minimum liability insurance requirements
How much liability insurance do you need?
You’re required to have only the amount of liability insurance mandated by your state, but you may want a higher limit to protect your savings and other financial assets should you cause an accident. 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.
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 and the medical bills of all four passengers. Now, you’re looking at almost $500,000 in medical bills to pay and another $50,000 for the car and damage to the roadway. Can your liability insurance pay for them?
If you don’t have enough coverage — that is, if your bodily injury and property damage limits aren’t that high, respectively — you’ll be 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 garnished. The more you have to lose, the more they can come after.
As a general rule, you’ll want enough liability insurance to cover your net worth. That’s equal to the value of all the cash you have and things you own, minus your debt.
If you don’t have much stuff, there’s less incentive to sue you, and you may not need any additional coverage. Maybe you’ll decide the extra money in your pocket is worth more than the peace of mind from extra coverage.
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Need more 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 max bodily injury limit of $500,000 or lower.
If you think you’ll need even more liability coverage than your auto insurer will provide, consider an umbrella insurance policy. 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. 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.
Liability auto insurance if you don’t own a car
If you don’t own a vehicle but sometimes drive someone else’s, you may want to buy liability coverage in the form of non-owner car insurance. This type of policy pays out if you’re found responsible for injuries or property damage while driving someone else’s car.
Non-owner insurance is auto liability coverage only, and is appropriate only if the cars you typically borrow (or rent) belong to someone outside your household. Otherwise, you should be added to your household member’s auto policy. (If an insurer finds out you live with a customer, they may have already added you.)