If you are at fault in the collision, liability auto insurance will cover the medical expenses of the injured party. They will also cover costs associated with any property damage. Although policy details vary by provider, liability insurance generally covers the following two types of coverage:
1. Personal Injury (BI) Liability:
This will pay for the medical bills of the injured person if you were at fault in the accident. It will also cover lost wages due to injuries. It will also cover expenses related to pain and suffering.
2. Property Damage Liability (PD):
This includes the cost of repairing or replacing objects damaged in an accident. This may include damage to other vehicles as well as other types of property such as houses, fences, and shops.
Understanding Auto Liability Insurance
Liability auto insurance helps cover the cost of damages due to car crashes. If a driver is found to be at fault in an accident, their insurance company will pay, within policy limits, the property and medical expenses of other parties involved in the incident.
However, in jurisdictions with no-fault auto insurance, drivers involved in an accident must first file a claim with their insurance company, regardless of who is at fault. In some states, drivers are generally obligated to obtain Personal Injury Protection (PIP) insurance. This includes accident-related medical expenses for themselves and their passengers.
Failure to obtain liability insurance can result in your license being suspended, fined, or jailed for repeat offenses.
Auto Insurance Limits of Liability
Liability auto insurance includes dollar limits on each of its components. It depends on the level of coverage you chose when you purchased the policy. These are some examples:
1. Limitation of Liability for Property Damage
This is the maximum insured amount for property damage. Any charges over the cap are the responsibility of the driver at fault.
2. Limitation of Liability for Personal Injury per Person
The per-person limit is the maximum amount an insurance company will pay for each person injured in an accident.
3. Limitation of Liability for Personal Injury Per Accident
The limit of liability per accident is a cap on the total amount the insurance company will pay for all individuals involved in the accident. In other words, the policy will only cover medical expenses for those injured in accidents caused by negligent drivers, up to a certain limit. Any medical expenses over that amount will then be borne by the at-fault driver.
Liability Auto Insurance Requirements
Each state sets the minimum amount of liability insurance a driver must-have. For example, a state might require all drivers to have liability coverage for $25,000 for a single injury, $50,000 for multiple injuries, $50,000 for a single fatality, and $10,000 for property damage. Drivers often purchase additional liability insurance beyond state requirements. It’s usually a good idea to do this because medical bills can be very expensive.
If you have substantial assets to protect against potential lawsuits, you may want to consider purchasing an umbrella policy. This can increase the coverage of your auto and homeowners insurance policies to $10,000 or more.
Difference insurance is another form of insurance you may need if you drive a high-priced vehicle that is rapidly depreciating.
What does liability auto insurance not cover?
If you are at fault in the collision, liability insurance will not cover you or your property. If you are injured or your vehicle is damaged, you may be liable for injuries caused by your medical or auto repairs.
While liability insurance doesn’t cover these costs, you can choose from different policies to cover drivers even if they’re at fault in an accident:
Personal Injury Protection (PIP) Coverage:
This insurance will pay for your medical expenses such as ambulance costs, hospital costs, necessary medical procedures, and lost income. It may also cover passengers and any households living in your home, depending on your policy and insurance provider.
This insurance covers the cost of car repairs and replacements.
Who is covered by liability auto insurance?
If you plan to drive in the US, you will almost certainly need some form of basic liability insurance. Currently, 49 states and the District of Columbia have laws requiring drivers to carry liability auto insurance, although the type and amount vary. New Hampshire is the only state that does not require drivers to have liability insurance. However, drivers are still advised to do so.
How much liability car insurance do I need?
Start by looking at your state’s limitation of liability laws to determine how much liability coverage you need. Contact your state’s Department of Transportation, visit their website, or speak with a registered insurance agent or broker in your area to learn more about your state’s minimum liability requirements.
Another thing to consider is the value of your assets and your ability to meet any financial obligations arising from the accident. While a small fender bender may not result in a massive out-of-pocket cost, a catastrophic accident or one that causes significant property damage can be costly. If your state’s minimums are too low, you may find that those minimums are insufficient to cover liability costs if you were at fault in a collision.
For example, in Pennsylvania, residents only need to purchase property damage liability insurance for $5,000. If you cause an accident that causes $15,000 in damage to another car, several cars, or someone’s property, you may be responsible for the remaining $10,000. If you can’t pay, you could be sued.
So, with this in mind, the value of your assets can help you determine whether the minimum liability coverage required by your state is adequate, or whether a higher-limit policy is preferable. The Insurance Information Institute, a consumer-facing group that provides insurance information and tools, recommends purchasing adequate liability insurance to cover your assets, such as your home and bank accounts.
How Much Does Auto Liability Insurance Cost?
Auto liability insurance costs will vary based on several factors. This includes the limits you choose, your driving record, your age, where you live, how often you drive, and the value of your vehicle, which is usually the case for insurance costs.
Shopping around is the best way to find liability insurance that fits your needs and budget. Many insurance companies offer online quotes that you can compare to get the best car insurance company or the cheapest car insurance.
Be aware of any discounts or savings opportunities your insurance offers. Many auto liability insurance companies will offer discounts to eligible drivers.
How Much Auto Liability Insurance Should You Get?
Any expenses beyond the limits of your liability are borne by you; you must pay out of your own money. Therefore, it may be a good idea to increase your auto liability limit beyond the state’s minimum requirements by getting more insurance.
Consider the following: You are responsible for the injuries to the three people in the other vehicle. Your injury liability limit is $50,000 per person and your injury liability limit per accident is $100,000. If person 1 has a total medical bill of $40,000, person 2 has medical bills of $30,000, and person 3 has medical bills of $25,000, you may be covered for less than $50,000 per person (your bodily injury limit) and the total cost of the injury is $95,000, which is less than your $100,000 bodily injury limit per incident.
But imagine that all three have $50,000 in medical bills for a total of $150,000 in medical bills. So, in this case, your injury liability insurance would cover the $100,000 payout and you would be responsible for the remaining $50,000.
Does my liability auto insurance cover my car if I am hit?
Your liability insurance will not cover your car if another driver causes an accident. Therefore, in this case, the other party’s insurance should cover your loss. You can also get uninsured/underinsured motorist insurance if you are hit by a driver who does not have adequate liability insurance. If you have collision insurance, you may be able to pay your deductible and get the balance of the car damage covered by the collision insurance.
Will my assets be at risk even if I have auto liability insurance?
If you cause an accident that costs the other party more than your liability coverage limits, your assets may be damaged. Consider purchasing a policy that covers up to your entire net worth. If your basic home and auto policy has limited liability coverage limits, you can get umbrella coverage to increase your liability protection.
What if I was at fault in an accident and another driver files a car liability insurance claim?
In most cases, your insurance premiums will go up if you are found to be at fault in an accident and your insurance company needs to pay for other drivers’ losses. To keep your premiums low, obey traffic laws and avoid driving habits that can lead to accidents. Some insurance companies now offer safe driving programs that monitor your driving behavior and offer discounts for good habits.
Example of Liability Auto Insurance
Here’s how liability auto insurance works without no-fault coverage. Suppose a motorist has the following liability auto insurance with their insurance company:
- The personal injury liability limit of $60,000 per person
- Personal injury limit of $150,000 per accident
The insured is involved in multiple collisions and is held liable for any damages.
- Person A’s medical expenses total $30,000
- Person B’s medical bills total $40,000
- Person C’s medical expenses total $50,000.
In this case, the at-fault driver’s liability will be covered because the medical bill for each person involved in the accident is less than $60,000. In addition, the total cost of all involved (except the at-fault driver) is less than the $120,000 personal injury limit per accident.
It’s worth noting that some policies won’t cover anything above the per-accident limit, even if it doesn’t exceed the per-person limit. Assume that in the previous example, each person has $55,000 in medical bills. While these individual costs are all within the $60,000 per person limit, the $165,000 total cost exceeds the $150,000 per incident limit. As a result, the driver at fault will be liable for an additional $15,000 in damages.
While states set statutory minimums for auto insurance coverage, buying more than the minimums is usually a wise decision.
Which car insurance offers the cheapest liability-only coverage?
We looked at at least 10 of the top insurance companies in five states to see who offered the cheapest liability-only auto insurance. The lowest business is usually not a household name, although these insurers may not offer coverage everywhere.
For our hypothetical driver:
- Of the major insurers, State Farm’s absolute liability coverage is the most economical, with a six-month quote of just $356, 469% less than the average price of $55.
- With a premium of $409, Geico is a close second.
- USAA is by far the lowest option for eligible current or former military members. Its six-month interest rate is just $215.
Also, some smaller auto insurance companies can offer liability-only coverage at a very low cost. Over six months, Farm Bureau affiliates cost our sample drivers an average of $218, while Erie, which is available in 12 states, and Washington, D.C., cost $226.
Listed below are six-month liability auto insurance rates for all insurers that offer policies in at least five states and provide data.