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Liability auto insurance is the best way to protect yourself against substantial financial loss in the event of a car accident where you're at fault. Nobody likes to think about something like this happening, but when you're faced with a serious car accident, the last thing you want to have to worry about is if there will be enough money or car insurance to cover injuries and damages.

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What Is Liability Car Insurance and What Does It Cover?

Liability insurance covers the driver of another vehicle if you are in an accident that is your fault. It doesn't cover you, your injuries or your car. Still, it can help protect you from being personally sued if you have purchased enough liability insurance to cover the other party's losses.

Liability insurance is required in every state except New Hampshire. If you are hit by someone else, and it's their fault, their liability insurance will cover damage to your car and your medical bills. There are two types of liability insurance:

Bodily Injury Liability

Bodily injury liability covers the driver and occupants of the other car if you cause an at-fault accident resulting in injuries. It does not cover injuries you or your passengers sustain in the accident. Bodily injury liability covers medical bills, pain and suffering and wages lost by the other person as a result of not being able to work while recovering from injuries.

Property Damage Liability

Property damage liability insurance covers damage to the other person's property, usually their car, but it can include items inside the vehicle. If you drive into a building, property damage liability will cover the damage to the building up to the policy's limit. You'll need both types of liability insurance to protect yourself.

The Liability Insurance Formula

Liability insurance limit amounts are given as three numbers separated by slash marks, for example, 50/100/50.

In this case, the first 50 means $50,000 and refers to the amount of bodily injury coverage per person covered by the policy. The 100 means $100,000 of bodily injury coverage per accident. The last 50 refers to the amount of property damage liability per accident, which would also be $50,000.

Keep in mind that bodily injury liability is per person, while property damage liability is per accident. If you hit three people and three cars in the same accident, your insurance will cover you for up to $100,000 for the bodily injuries of the people you hit ($100,000 maximum) and only up to $50,000 for all three of the cars. In this scenario, you would probably max out the policy, and you would be held liable and possibly sued for any remaining bills.

50/100/50 Insurance Explained

LimitCoverage
50$50,000 in bodily injury liability coverage per person
100$100,000 in bodily injury coverage per incident
50$50,000 in property damage liability per incident

What Is the Cost of Liability Auto Insurance?

The average cost of liability coverage for a 50/100/50 policy is $864. If you upgrade to full coverage, including collision and comprehensive, the average cost is $1,270, or an increase of 31.98%.

However, if you add collision and comprehensive insurance to your policy, you and your vehicle will be covered in an accident if you're at fault. This makes the extra cost of the insurance worth it to most people. Collision will cover damage that occurs from hitting something, and comprehensive covers damages from theft, weather, animals (such as hitting a deer) and vandalism. If you have a loan on your vehicle, the finance company will require you to carry collision and comprehensive insurance.

Average Annual Cost of Liability Coverage

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Do I Need Liability Coverage and What Is the Minimum Requirement?

States vary in how much liability coverage they require, with most states requiring at least $15,000 in bodily injury coverage per person, $30,000 in bodily injury per accident, and at least $10,000 in property damage. The policy would read 15/30/10. Some states also require uninsured motorist coverage (UM), underinsured motorist coverage (UIM) and personal injury protection (PIP).

No matter your state's requirements, you need to have liability insurance or very deep pockets, as it's against the law in most states to drive without liability coverage. New Hampshire doesn't require liability insurance, but they do require drivers to prove they have some means of financial responsibility if they cause an accident.

How Much Liability Insurance Should You Buy?

State minimum requirements for liability insurance may not be enough to cover you if you cause an accident. You will have to pay for anything that is not covered by liability insurance, and medical bills can skyrocket very quickly.

Using Your Liability Insurance

This example illustrates how liability insurance is used and how not having enough liability insurance may lead to you paying out-of-pocket costs.

Susan is driving home from work and hits another vehicle. The other car is driven by a couple, Dan and Amy, with their child, Allison, in the back.

Susan has 50/100/50 in liability insurance.

  • Dan injures his back, and his medical bills total $30,000.
  • Amy breaks an arm and suffers internal injuries. Her medical bills cost $45,000.
  • Allison breaks a leg, and her medical bills cost $7,000.

This scenario is covered by Susan's plan because all three people's injuries total $82,000, and Susan is covered for up to $100,000 per accident.

As a comparison, imagine there's a fourth person in the car, Tony, and Tony's medical bills total $40,000. Susan would then be on the hook to pay the extra $22,000 not covered by her liability insurance.

This also assumes no one in the car Susan hits sues her for lost wages or pain and suffering. Medical expenses add up quickly and can easily bankrupt you.

What Is Not Covered by Liability Insurance?

Liability insurance is pretty bare bones. It doesn't cover options such as:

  • Collision (damage to your own vehicle).
  • Comprehensive (damage to your own car in anything other than an accident with another car).
  • Uninsured motorist coverage (protects you if someone with no insurance hits you).
  • Underinsured motorist coverage (covers you if you're hit by someone who doesn't have enough insurance).
  • Personal injury protection (things like medical expenses and lost wages).

Liability Insurance Frequently Asked Questions

Because liability insurance is required in 49 states, many questions arise about it and what it covers. Below are some of the most frequently asked questions about liability insurance.


Does liability insurance cover theft?This is an icon

No, liability doesn't cover theft. Comprehensive insurance will cover your vehicle if someone steals it or breaks into it and damages it in the process. Comprehensive also covers weather-related damage and vandalism.

Can you get liability-only insurance on a financed or leased car?This is an icon

Most finance companies will not let you drive away with a car only covered by liability insurance. If you have a loan on the vehicle or lease a vehicle, the finance company is giving you a loan with the car's cost as collateral. If you only get liability insurance and total the car, it's suddenly worth much less than the amount they loaned you, and they have no way to recover that money. The same goes for a vehicle that you lease. Collision and comprehensive coverage protect the finance company's investment.

Does liability insurance cover my car if I’m not at fault?This is an icon

If you're in an accident and the other person is clearly at fault, their liability insurance should cover your car's damage. If you're injured in the accident, the other person's liability insurance should cover that as well. If you're in a no-fault insurance state, each insurance company covers its respective client's medical bills.

Does liability insurance cover my car if I am at fault?This is an icon

Liability protects anyone you hit in an accident. It doesn't cover your medical expenses, damage to your car or other losses you experience. You will not only have to pay for the damage to the other person's car, but you will also have to pay for the damage to your own vehicle out of pocket. If you opt only for liability coverage, you will need to cover any injuries you sustain in the accident, either with your health insurance or out of pocket.

Does liability insurance cover weather-related damage?This is an icon

Liability insurance only covers the other person in an accident you cause. It doesn’t cover damage to your car if it’s damaged by hail or swept away by a flood. Comprehensive insurance covers damage to your car when it’s not moving: anything from vandalism to the weather to theft.

Unless you can cover a catastrophic car accident with money you have on hand, the best way to protect yourself against being sued over a car accident that is determined to be your fault is by purchasing liability insurance. Even the necessary amount required by law might not be enough to protect yourself, but by shopping around and speaking to your insurance agent, you can find a car insurance policy that meets your needs and gives you peace of mind.

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About the Author

Gail Kellner is a freelance writer who specializes in personal finance and insurance. She loves to help people make the best financial decisions they can. When she's not writing about financial matters, she writes children's fiction and her first book will be coming out sometime soon (or so her publisher says). She has two delightful children on the autism spectrum and a husband who says he is not on the spectrum.

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