While a good auto insurance policy is made up of several types of coverage, liability insurance is the foundation. it is required in most states and is often the most expensive part of a policy.
It’s also coverage you don’t want to skimp on. If you don’t buy enough liability coverage, you could be setting yourself up for financial disaster if your auto insurance can’t cover all the bills from a car accident you caused.
what is civil liability car insurance?
Liability insurance pays others when you are at fault in a car accident that causes bodily injury or property damage. Liability insurance also pays for costs related to the law if you are sued because of a car accident. These costs include your legal defense and trials and settlements arising from a lawsuit.
Here are examples of when liability coverage comes into play:
- You are looking at your navigation system and you hit the car in front of you from behind.
- swerves and accidentally hits someone else’s car.
- You accidentally hit the gas instead of the brake and hit a neighbor’s fence.
- Bodily Injury Liability (bi) Coverage: Bodily Injury Liability coverage has payment limits for bodily injury to one person in an automobile accident and bodily injury to more than a 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 accident.
- Property Damage Liability (PD) Coverage: Property Damage Liability coverage has limits on payment for property damage in any accident you cause.
- 15 = $15,000 bodily injury/death coverage for one person per accident.
- 30 = $30,000 bodily injury/death coverage for more than one person per accident.
- 5 = $5,000 property damage coverage per accident.
- $100,000 bodily injury to one per person per accident.
- $300,000 bodily injury to more than one person per accident.
- $100,000 property damage per accident.
- Collision insurance. This pays car repair bills (minus your deductible) if you are in a car accident, no matter who is at fault for the accident. Collision insurance is an optional type of coverage, which means you’ll have to pay more to add it to your policy.
- Comprehensive insurance. This pays to repair or replace your car for problems such as floods, fires, falling objects, hail, collisions with animals, vandalism and auto theft. Comprehensive insurance is an optional type of coverage, and you’ll have to pay more to add it to your policy.
- Uninsured or underinsured motorist coverage. These types of coverage pay for medical bills and other expenses for you and your passengers if a driver without liability insurance or insufficient liability insurance civilian crashes into you. uninsured motorist coverage is required in some states and optional in others.
- personal injury protection and medpay. these types of coverage pay medical bills and other expenses for you and your passengers, no matter who was at fault for the accident. Personal Injury Protection (PIP) is required in some states, but may be optional or unavailable in other states.
- your driving history, such as speeding tickets and other moving violations
- your claim history
- the amount of coverage you buy
- your age
- Other factors that may vary by state and company, including gender, marital status, occupation, and credit (use of credit to determine insurance rates is prohibited in California, Hawaii, Massachusetts, and Michigan)
- You were found at fault in an accident where you had no insurance and now you must provide proof of insurance.
- was convicted of driving while intoxicated (dwi) and must show proof of insurance for a minimum of three years.
- is decertified as a habitual offender, but you must show proof of insurance before you can get your license back.
- You must appear at an administrative hearing for certain infractions (such as demerit points) and you are required to purchase insurance as a condition of retaining or regaining your license.
what does liability insurance cover?
Liability insurance covers you when you are in a car accident that results in bodily injury or property damage to others. There are two components to auto liability insurance:
reading car liability insurance limits
Auto liability insurance has coverage limits, which is the most your insurer will pay for bodily injury and/or third party property damage if you are at fault in a car accident.
You can choose your liability limits. Most states require a minimum level of liability coverage, but it’s usually not enough to adequately protect you if you’re in an accident.
Auto liability insurance limits are usually shown as a series of three numbers. for example, you might see it written as 15/30/5. the first two numbers are for bodily injury coverage and the third number is for property damage coverage. for example, this is what 30/15/15 means:
Liability limits of at least 100/300/100 are much better, and you may want even higher limits if you have a lot to lose in a lawsuit. 100/300/100 means:
remember, liability insurance pays others. it does not cover your own injuries or damage to your vehicle.
what does liability insurance not cover?
Liability insurance does not cover everything. for example, it is not worth repairing your own vehicle or replacing your car if it is stolen by a thief. other types of auto insurance may cover those issues.
These are some common types of auto insurance:
how much does liability insurance cost?
The cost of liability insurance is based on several factors, including:
Auto insurance rates vary widely between companies because they all have their own way of calculating rates. you may be able to find the exact same coverage at a much better price from a different company. That’s why it’s a good idea to compare auto insurance quotes from multiple companies.
average liability insurance costs by state
Do I need auto liability insurance?
All states have some type of financial responsibility law, which means you show you can pay if you or someone else driving your car causes an accident. most drivers satisfy this requirement by purchasing auto insurance. is usually the easiest and most affordable option.
If you don’t want to buy auto liability insurance, your state may require you to post a bond to prove your financial responsibility. the cost of a bond can be as high as $50,000, depending on your state.
states that do not require liability insurance
In many cases, New Hampshire drivers are not required to carry auto insurance. but you must be able to show financial responsibility if you cause a car accident.
Other instances where you will be required to purchase auto insurance in New Hampshire are:
Even without an insurance requirement, purchasing auto insurance is a smart way to protect yourself from the costs of accidents. If you decide to purchase a policy, you must purchase at least 25/50/25 liability auto insurance in New Hampshire.
Drivers in Virginia can pay a $500 uninsured motor vehicle fee to skip car insurance. But if you cause an accident, you’ll still be personally liable for injuries and property damage, which means you could be forced to pay for injuries and property damage.
If you decide to purchase auto insurance in Virginia, you will need to purchase a minimum of 25/50/20 liability auto insurance.
How much liability auto insurance do I need?
A general rule of thumb is to purchase enough liability insurance to cover what you stand to lose in a lawsuit, based on your assets. here’s why:
Let’s say you buy your state’s minimum auto liability insurance of 15/30/5 and cause an accident that injures multiple people and results in $100,000 in medical bills. your insurer will pay $30,000 and you will be responsible for the remaining $70,000.
To get a comprehensive amount of liability insurance, consider purchasing an umbrella insurance policy. umbrella insurance provides excess liability coverage of $1 million and more. When your auto liability insurance runs out, umbrella insurance kicks in. You can typically buy $1 million in coverage for about $150 to $300 per year, according to the Insurance Information Institute.
minimum liability insurance requirements by state
three things to consider when getting auto liability insurance
The amount of liability insurance you need depends on where you live and what you have to lose. Here’s what to consider when shopping for auto liability insurance.
determine how much liability insurance you need
Most states require a minimum amount of auto liability insurance. but the state minimum may be inappropriate for your specific needs.
for example, the state of texas minimums are 30/60/25. in that case, you need at least $30,000 in bodily injury coverage per person per accident, $60,000 in bodily injury to more than one person per accident, and $25,000 in property damage per accident. That’s probably not enough to protect your assets, like your home and savings account.
calculate how much you have to lose in a lawsuit
One thing that should influence your liability coverage is how much you could lose in a lawsuit.
For example, if you own a home and have savings, you may want to purchase liability insurance that is well above your state’s minimum requirement. If you don’t have enough auto liability insurance, your assets could be at risk if you cause a car accident that results in substantial damage or injury.
look for ways to maximize liability insurance while saving in other areas
Liability insurance is a vital part of your auto insurance coverage. not a good place to skimp.
A better money-saving strategy to look elsewhere for ways to save on your policy. For example, ask the insurance company how much you’d save if you increased your deductible on comprehensive and collision insurance.
Insurance deductible is the amount deducted from your insurance claims check if you file a collision or comprehensive claim. the higher your deductible, the less you’ll pay in premiums. but make sure you can meet a higher deductible amount if you need to file a claim.
You can also ask your insurance agent about auto insurance discounts. you may qualify for discounts you are not currently receiving.
Another good discount is a multi-policy discount. that’s when you combine your auto and home insurance policies. it’s usually one of the best discounts you can get.
If your car isn’t worth much, you may want to skip buying comprehensive and collision auto insurance. These are two separate types of coverage that are often sold together. Collision covers damage to your vehicle if it is damaged in a collision with another car or object (such as a fence). comprehensively covers your vehicle for problems such as fire, flood, hail, vandalism, falling objects, collisions with animals and auto theft.
You’ll most likely need to have comprehensive and collision insurance if you have a car loan or lease.
related: when to drop comprehensive and collision insurance