Imagine driving to work and rear-ending someone. It’s a daily occurrence across America, making up 28% of all car crashes. A single accident, even a minor one, can lead to expensive medical bills or repair costs. That’s why almost every state requires liability insurance coverage.
Liability insurance pays for car damages and injuries to other drivers following an accident. In this article, you’ll learn what this coverage is and how it works. We’ll tell you:
- What it covers
- What it doesn’t cover
- How much it costs
- How much you need
- Frequently asked questions
Liability Insurance Basics
If you cause an accident, you’ll have to pay for damages or injuries to you and any other parties involved. Liability coverage protects you from paying out of pocket when you cause an accident.
Most states require some form of liability to drive, but the required limits are often very low. In many cases, the minimum coverage requirement is insufficient for severe accidents. So, it’s up to you to decide how much risk you can tolerate. Note that it doesn’t pay for any damages to your vehicle. It only covers repair costs for other cars you damage in a crash. To fix your own car, you must have collision insurance.
When your policy also includes liability, collision and comprehensive, you have what’s known as full coverage. Liability is always required, but it’s the most important of the three primary auto insurance types needed to protect yourself in most situations.
What It Covers
First, it’s very important to understand what liability coverage doesn’t cover. Knowing this will prevent any issues when you file a claim with your insurance provider.
Liability doesn’t cover any physical injury to you or your passengers or damage to your car. It only covers the other parties involved. Coverages like personal injury protection (PIP) cover your own injuries. States don’t require collision or comprehensive, but some may require PIP.
Liability has two main components. The first covers property damage that you cause (PDL). And the second covers any bodily injuries that the other party suffers (BIL).
Here’s a quick breakdown of each part of the coverage:
Property Damage Liability (PDL)
Property damage liability, or PDL, covers any property damage you cause. It only covers up to the limit that the liable driver purchases. Remember, your state will require you to have a certain amount (unless it doesn’t require any car insurance). But the minimum amount may not be enough to cover the full extent of the damages. Types of property damage include:
- Another driver’s car
- Buildings or structures
- Streetlights or lampposts
- Damages to any other property because of an accident
- Any court costs in the event of a lawsuit for damages
Bodily Injury Liability (BIL)
Bodily injury liability, or BIL, covers any injuries or medical bills that the other passengers have. The amount that it covers will only be up to the coverage limits on the liable driver’s policy. Below are what BIL covers:
- Any medical costs and potentially lost income of the affected person (could be the other driver, a pedestrian, or possibly a passenger in your own car)
- Long-term medical care required by the other party
- Funeral costs and pain and suffering if a death occurs because of the accident
- Your legal fees if the other party affected happens to file a lawsuit against you
Most States Require Liability
Every state besides New Hampshire and Virginia requires some form of vehicle coverage. Even in states that don’t require any, you’re still accountable for any damages you cause. Each state that requires coverage sets minimum limits. This means that you’ll need to have a set amount of liability insurance protection depending on your state.
How to Read Coverage Limits
Three common coverage limits relate to liability:
- Property damage limit. The max amount that the insurer will pay for damages.
- Bodily injury limit per person. The max amount your provider will cover for a person’s injuries.
- Bodily injury limit per accident. The limit for the total amount the insurer pays for injuries.
The required limits for liability insurance are on a per-person basis for BIL. PDL limits are up to a total dollar amount of damages. For example, according to its Department of Motor Vehicles, California requires drivers to have:
- $15,000 for injury or death to a person
- $30,000 for injury or death to two or more people
- $5,000 for any damage to property
Often, you’ll see insurance companies present limits as –/–/–. For the state of California example, it would look something like 15/30/5. Each number represents an amount in thousands of dollars worth of coverage.
Reasons for Requiring Liability
States require car insurance for good reason. Without liability protection, you and the other party would have to pay for damages yourself. Proper coverage protects each party from financial ruin. If you can’t pay for damages after an accident, the other party may sue you for your assets, such as:
- Savings accounts
- Houses or real estate
- Future paychecks and income
Besides covering car crash expenses, driving without coverage can land you in jail. You may also have to pay fines. It can cost you in a lot of ways. Carrying proper insurance protects you and the other party from disaster. That way, you can both move on with your lives after the accident.
How Much Liability Should You Buy?
Most states require at least some amount of liability car insurance. But that may not be enough. Often, the total cost of medical bills and damages will mount after an accident. Drivers may need to pay medical bills for months or even years in the wake of an accident. The general idea is to buy as much as you can afford. That way, you’ll have as much protection as possible from having to use your assets to pay for an accident.
49 states require basic liability insurance. The District of Columbia and Puerto Rico also require it. There’s no way around it. You’ll need to buy this coverage before you can drive if you live in a state that mandates it.
Note: Virginia requires liability coverage unless drivers register as uninsured. If you do this, you must pay a fee.
You’d have to pay out of pocket if your car insurance coverage doesn’t cover the total cost of damages. The state could revoke your license if you don’t pay what you owe after an accident.
Max Out Your Liability Coverage Limits
It’s wise to try and max out your coverage as much as possible because you can risk racking up large costs. Doing so would help you to avoid paying any money out of pocket after an accident.
Minimum limits usually don’t cover the total cost of an accident. Normally, limits are the bare minimum amount of car insurance you must have. You may also need other types of coverage to fit your needs. Be sure to speak with your agent about what types you should have on your policy.
Most insurers sell umbrella policies, but what are they? Basically, they cover the same situations as liability. The difference is that umbrella policies add extra coverage to what liability already offers.
Umbrella insurance covers any extra costs that standard liability policies can’t. They protect the liable driver from needing to pay out of pocket for leftover costs. For instance, in some cases, legal fees will exceed coverage limits.
These policies are great for protecting you from huge expenses. As an example, crashing into an exotic car would cost you thousands to repair. The expenses could go over your liability limits. Luckily, an umbrella policy would go beyond your limits and cover you.
Cost of Liability Coverage
Everybody pays a different amount for their policy. Insurers use a variety of factors to help determine your rates. These factors are little details about you that can tell a company if you’re a risk for filing claims. Here are some of the most common examples:
- Past driving record
- How much coverage you buy
- Type of car you drive
- Where you live
- Annual car mileage
One insurer might charge you less than another. It’s always a good idea to compare quotes before you settle on a company. That’s the only way to know you’re getting the best rate.
US Average Liability Rates By State
The table below displays national average liability coverage rates ranging from 2012 to 2019. It’s the most recently available set of pricing data from the Insurance Information Institute (III).
Below is a visual representation of the above data:
Average Liability Rates by State
While several details go into how much liability insurance costs, where you live is one of the most prominent. Companies often vary rates depending on the number of claims, medical expenses, how well people drive, and the population in certain areas. On average, this means that if you live in a riskier state, you’ll pay more for protection.
The following table shows average liability coverage rates in all 50 states and Washington, D.C. in 2019. The costs you see come from the III, and were originally collected by the National Association of Insurance Commissioners (NAIC). The national average we compared each state to was $650.35 in 2019.
|State||Average Cost||US AVG Difference|
|District of Columbia||$819.36||+20.6%|
Frequently Asked Questions
How does liability work if I live in a no-fault state?
In a no-fault state, an insurer will pay for the injuries of the other party up to a certain point. You may have to cover the leftover expenses if the costs exceed your limits.
Liability coverage is useful in no-fault states because it will cover the extra expenses without you having to pay out of pocket.
What will happen to my rates after an accident?
After any car accident that you’re involved in, your rates may increase. The best way to avoid a high premium is to drive as safely as possible and avoid traffic violations. If you still feel that your rates are high, be sure to look for discounts that apply to you or find an insurer that’ll give you a better deal.
Is an umbrella policy the same as liability coverage?
Not exactly. An umbrella insurance policy adds an extra amount of liability protection. Excess liability is another name for these policies. This is because it covers any excess damages that need to be paid.
Umbrella also pays for damages unrelated to your vehicle. An example would be someone slipping and falling in your home and needing extensive care. Liability insurance, on the other hand, will only pay for damages related to a motor crash.