Liability Car Insurance: Cost And Coverage

While a good car insurance policy includes a variety of coverage options, liability car insurance is the cornerstone. It is required in the majority of states and is typically the most expensive component of a policy.

It's also not something you want to skimp on. If you do not purchase enough liability coverage, you may be setting yourself up for financial disaster if your car insurance does not cover all of the bills resulting from a car accident that you caused.

What Is Liability Car Insurance?

Liability insurance compensates others when you are at fault in a car accident that results in bodily harm or property damage. Liability insurance also covers legal expenses if you are sued as a result of a car accident. These expenses include your legal defense as well as any judgments or settlements obtained as a result of a lawsuit.

Here are some examples of when liability coverage is useful:

• You’re looking at your navigation system and rear end the car in front of you.
• You swerve and collide with someone else's vehicle.
• You hit the gas instead of the brake, crashing into a neighbor's fence.

What Does Liability Insurance Cover?

Liability car insurance protects you if you are involved in a car accident that causes bodily harm or property damage to others. Liability car insurance consists of two parts:

• Bodily injury (BI) liability coverage: Bodily injury liability coverage has payment limits for bodily injuries to one person in a car accident and bodily injuries to more than one person in a car accident. This coverage handles medical bills and lost wages for people in another vehicle if you are at fault for the crash.
• Property damage (PD) liability coverage (PD): This coverage provides payment limits for property damage in any one accident that you cause.

Reading Liability Car Insurance Limits

Liability car insurance has coverage limits, which are the maximum amounts your insurer will pay out if you are at fault in a car accident for bodily injury and/or property damage to others.

You can set your own liability limits. Most states require a minimum level of liability coverage, but it is often insufficient to adequately protect you in the event of a collision.

Car insurance liability limits are typically displayed as a series of three numbers. For example, it could be written as 15/30/5. The first two numbers indicate bodily injury coverage, while the third indicates property damage coverage. For example, 15/30/15 denotes the following:

• 15 = $15,000 in bodily injury/death coverage per accident for one person.
• 30 = $30,000 in bodily injury/death coverage for multiple people per accident.
• 5 = $5,000 of property damage coverage per accident.

Liability limits of at least 100/300/100 are preferable, and if you stand to lose a lot in a lawsuit, you may want even higher limits. 100/300/100 denotes:

• $100,000 for one person's bodily injury per accident.
• $300,000 for more than one person injured in an accident.
• $100,000 for property damage per accident.

Remember that liability insurance compensates others. It does not cover your own injuries or vehicle damage.

What Doesn’t Liability Insurance Cover?

Liability insurance does not provide complete coverage. It doesn't make sense, for example, to repair or replace your own vehicle if a thief steals it. These issues may be covered by other types of car insurance.

Here are some examples of common types of car insurance:

• Collision insurance. This pays for car repair bills (less your deductible) if you are in a car accident, regardless of who is at fault. Collision insurance is an optional coverage type, which means it will cost you more to include it in your policy.
• Comprehensive insurance. This covers the cost of repairing or replacing your vehicle in the event of a flood, fire, falling object, hail, collision with an animal, vandalism, or car theft. Comprehensive insurance is an optional coverage type that will increase the cost of your policy.
• Uninsured and underinsured motorist coverage. These coverage types pay for medical bills and other expenses for you and your passengers if you are hit by a driver who does not have liability insurance or does not have enough liability insurance. Some states require uninsured motorist coverage, while others make it optional.
• Personal injury protection and MedPay. These types of coverage pay for medical bills and other expenses for you and your passengers, regardless of who was at fault in the accident. Personal injury protection (PIP) is mandatory in some states but optional or unavailable in others.

How Much Does Liability Insurance Cost?

The cost of liability insurance is determined by a number of factors, including:

• Your driving record, including speeding tickets and other traffic violations
• Your claims history
• The amount of insurance you purchase
• Your age
• Gender, marital status, occupation, and credit are some other factors that can vary by state and company (the use of credit to determine insurance rates is prohibited in California, Hawaii, Massachusetts and Michigan)

Auto insurance rates vary greatly between companies because each has its own method of calculating rates. You might be able to find the same coverage at a lower cost with a different company. That is why comparing car insurance quotes from various companies is a good idea.

Average liability insurance costs by state

Do I Need Liability Car Insurance?

Every state has some form of financial responsibility law, which requires you to demonstrate your ability to pay if you or someone else driving your car causes a crash. The majority of drivers meet this requirement by purchasing car insurance. It is usually the simplest and least expensive option.

If you choose not to purchase liability car insurance, your state may require you to post a bond to demonstrate financial responsibility. A bond can cost up to $50,000, depending on where you live.

States That Don’t Require Liability Car Insurance

New Hampshire

In many cases, drivers in New Hampshire are not required to purchase car insurance. However, if you cause a car accident, you must be able to demonstrate financial responsibility.

Other situations in which you will be required to purchase car insurance in New Hampshire include:

• You were found to be at fault for an accident in which you did not have insurance and must now provide proof of insurance.
• You were convicted of driving while intoxicated (DWI) and are required to file proof of insurance for at least three years.
• You have been decertified as a habitual offender, but you must show proof of insurance before you can reclaim your driver's license.
• Certain offenses (such as demerit points) necessitate an administrative hearing, and you must purchase insurance in order to keep or regain your license.

Even if insurance is not required, purchasing auto insurance is a wise way to protect yourself from accident costs. If you decide to purchase a policy, you must obtain at least 25/50/25 liability car insurance in New Hampshire.

Virginia

Drivers in Virginia can avoid car insurance by paying a $500 uninsured motor vehicle fee. However, if you cause an accident, you will still be personally liable for injuries and property damage, which means you may be forced to pay for injuries and property damage.

If you decide to purchase car insurance in Virginia, you must purchase a minimum of 25/50/20 liability coverage.

How Much Liability Car Insurance Do I Need?

A good rule of thumb is to purchase enough liability insurance to cover the amount of money you could lose in a lawsuit based on your assets. This is why:

Assume you purchase your state's minimum car liability insurance of 15/30/5 and cause an accident that injures multiple people and costs $100,000 in medical bills. Your insurer will pay $30,0000, leaving you to pay the remaining $70,000.

Consider purchasing an umbrella insurance policy to provide adequate liability coverage. Umbrella insurance provides up to $1 million in excess liability coverage. When your liability car insurance runs out, umbrella insurance takes over. According to the Insurance Information Institute, you can typically purchase $1 million in coverage for between $150 and $300 per year.

Minimum auto liability insurance requirements by state

Three Things to Consider When Getting Liability Insurance for Your Car

The amount of liability insurance you require is determined by where you live and what you stand to lose. Here are some things to think about when purchasing liability insurance for your car.

Determine how much liability insurance you need

Most states mandate a certain amount of liability car insurance. However, the state minimum may be insufficient for your specific needs.

For example, the Texas state minimums are 30/60/25. In that case, you'll need at least $30,000 in bodily injury coverage per person per accident, $60,000 in bodily injury coverage for multiple people per accident, and $25,000 in property damage coverage per accident. That is most likely insufficient to safeguard your assets, such as your home and savings account.

Figure out how much you have to lose in a lawsuit

The amount you could lose in a lawsuit should influence your liability coverage.

For example, if you own a home and have savings, you should purchase liability insurance that exceeds your state's minimum requirement. If you do not have adequate car liability insurance, your assets may be jeopardized if you cause a car accident that causes significant damage or injuries.

Look for ways to maximize liability insurance while saving in other areas

Liability insurance is an essential component of auto insurance coverage. It's not the place to cut corners.

A better way to save money is to look for other ways to cut costs on your insurance policy. For example, ask your insurance company how much you would save by raising your collision and comprehensive deductibles.

If you file a collision or comprehensive claim, your insurance deductible is the amount deducted from your claim check. The higher your deductible, the lower your premiums will be. However, make sure you can afford a higher deductible if you need to file a claim.

You could also inquire with your insurance provider about car insurance discounts. You may be eligible for discounts that you are not currently receiving.

A multi-policy discount is another good option. When you combine your auto and home insurance policies. It's usually one of the best deals available.

If your car isn't worth much, you may want to avoid purchasing collision and comprehensive coverage. These are two distinct types of insurance that are frequently sold together. Collision insurance protects your vehicle if it is damaged in a collision with another vehicle or an object (like a fence). Comprehensive coverage protects your vehicle against problems such as fire, flood, hail, vandalism, falling objects, animal collisions, and car theft.

If you have a car loan or lease, you will almost certainly be required to have both collision and comprehensive insurance.