What is liability car insurance?

Key points

• Liability insurance is a type of car insurance that pays for other people’s medical bills and property damage when you cause an accident.
• Your liability car insurance won’t cover your own medical bills or damage to your vehicle when you’re at fault for an accident.
• If you’re sued because of an accident, liability insurance pays for your legal defense and any judgments or settlements, up to your policy limit.
• To protect your assets, it’s a good idea to buy more than the minimum amount of liability insurance required by your state.

What is liability coverage in simple terms?

Liability car insurance is the foundation of a good car insurance policy. It helps cover expenses if you’re at fault for an accident that results in bodily injury or property damage to other drivers, their passengers or pedestrians. It also pays for your legal defense if you’re sued for an accident, as well as any judgments and settlements resulting from the lawsuit, up to the limits in your policy.  

If you don’t have enough liability car insurance, you could face penalties and fines. You may also be on the hook for accident-related expenses if you’re held legally responsible for someone else’s property damage or injuries. 

Liability car insurance coverage

If you’re at fault for an accident, liability insurance covers medical costs and property damage expenses incurred by the other driver, their passengers and any pedestrians involved in the accident. It also covers your legal fees and any settlements or judgments if you’re sued because of a car accident. 

Drivers in every state except New Hampshire and Virginia are required to carry a minimum amount of bodily injury liability coverage and property damage liability coverage. The amounts required vary by state.

Liability car insurance comes in two forms: 

Bodily injury (BI) liability insurance covers accident-related medical expenses and lost wages for the other driver, their passengers and any pedestrians injured in an accident for which you’re at fault.

Property damage (PD) liability insurance covers costs to repair or replace the property of others that was damaged in an accident you caused. This could include damage to another person’s vehicle as well as other property, such as a fence, gate or landscaping.

What liability car insurance doesn’t cover

Liability insurance only covers others when you cause an accident. It won’t cover medical bills or lost wages for you or your passengers. It also won’t cover the cost to repair or replace your vehicle. 

You may want to consider buying other types of car insurance to cover the cost of your own medical treatment and vehicle damage repairs, including: 

• Collision insurance. This optional coverage pays to repair damage to your vehicle after it collides with another object, such as a car or guardrail, regardless of who is at fault.
• Comprehensive insurance. Often sold with collision insurance, comprehensive insurance covers your vehicle if it is damaged by problems such as animals, fire, flood, hail, fallen tree branches, theft and vandalism. 
• Personal injury protection (PIP) and medical payments (MedPay). These coverage types pay for medical costs and other expenses for you and your passengers, no matter who is at fault for an accident.
• Uninsured and underinsured motorist coverage. These coverage types cover medical expenses for you and your passengers if you are hit by a driver without enough liability insurance. 

Understanding liability limits

Like other types of car insurance, liability insurance has coverage limits. Liability car insurance will not cover the cost of damage or injuries that exceed your policy limits.

Say your coverage limit for bodily injuries is $100,000 per accident. If you are at fault for an accident that causes bodily injury to the other driver and their passengers resulting in medical bills of $150,000, you could be responsible for paying the $50,000 not covered by your insurance.

Who needs liability car insurance?

Almost all states have set minimum coverage limits for bodily injury liability and property damage liability that drivers are required to buy. 

You’ll also likely need to buy liability insurance if you finance a vehicle. That’s because most lenders require you to carry full coverage, which includes liability insurance as well as collision and comprehensive insurance.

How does liability car insurance cost?

The average cost of a liability car insurance policy is $646 per year (about $54 per month), based on our analysis of rates from the top car insurance companies in the nation. 

How much you pay for liability car insurance will depend on several factors, including your:

• Age.
• Location.
• Type of vehicle.
• Driving record.
• Coverage types and limits you choose.
• Gender (banned in some states).
• Credit score (banned in some states).

The cost of coverage can vary substantially among providers. Based on our research, USAA offers the most affordable option at $367 per year, but USAA coverage is only available to active and former members of the U.S. military and their eligible family members. Several other insurers, including Auto-Owners, American Family, Geico and Erie also offer rates below the national average. 

Average cost of liability car insurance

Shopping around and comparing rates from at least three auto insurers can help you find the lowest price coverage for your needs. 

INSURER	AVERAGE ANNUAL RATE FOR LIABILITY INSURANCE
USAA	$367
Auto-Owners	$389
American Family	$448
Geico	$518
Erie	$525
Travelers	$565
Nationwide	$587
National Average	$646
Progressive	$749
Mercury	$788
Allstate	$811
Safe Auto	$882
Farmers	$898
State Farm	$1,079

See MoreSee Less

^{Source: Quadrant Information Services. Rates are based on liability coverage of 100/300/100.}

How to buy liability car insurance

You can purchase liability insurance from any auto insurer. When you shop for coverage, either online or with an agent, you’ll be able to buy the minimum amount of liability insurance in your state or opt for more coverage. 

State minimum liability car insurance requirements are typically broken down into three figures separated by a forward slash. These three figures represent: 

• Bodily injury coverage per person.
• Bodily injury coverage per accident.
• Property damage coverage per accident.

For example, Ohio’s minimum liability insurance requirement is 25/50/25, which means drivers in that state must purchase a policy with at least: 

• $25,000 of coverage for bodily injury per person.
• $50,000 for bodily injury per accident. 
• $25,000 in property damage per accident.

You can decide how much coverage to buy, as long as it’s equal to or greater than your state’s required minimums. The less coverage you buy, the lower your premium will be. But buying the least expensive car insurance policy could cost you much more if you cause an accident.

How much liability car insurance do you need?

You should always carry at least the minimum amount of liability insurance in your state. But there are benefits to carrying more, especially when it comes to protecting your assets. 

“While getting the minimum amount of liability coverage may seem the most affordable option today, there are risks involved,” said R.J. Weiss, a certified financial planner and founder of the personal finance site The Ways to Wealth. A lawsuit could drain your bank account. 

A key benefit of liability car insurance is that your insurer will fight on your behalf if you’re sued because of an accident you caused. 

Weiss offers guidance similar to Powell’s. “A good rule of thumb is to carry the most amount of liability insurance you can easily afford to pay for,” he said.

Liability car insurance FAQs