Alyssa Lane
Liability insurance is a type of auto insurance that covers the costs of injuries and property damage caused by the insured to others in an accident. It is mandated by law in nearly every state, with the exception of New Hampshire, South Carolina, and Virginia, although these states have some liability insurance requirements under certain conditions. The minimum liability insurance requirements vary by state, but they typically include bodily injury liability and property damage liability coverage. For example, in California, the minimum requirements are $15,000 for bodily injury to one person, $30,000 for bodily injury to multiple people in a single car accident, and $5,000 for property damage. However, these amounts may not be sufficient to cover the costs of a serious accident, and it is generally recommended to purchase higher liability limits if possible.
Liability insurance is essential for protecting oneself financially in the event of an accident. It covers the costs of medical expenses, lost wages, legal fees, and pain and suffering for the injured party, as well as repairs to their vehicle and other damaged property. Without liability insurance, one would be responsible for paying these costs out of pocket, which could result in significant financial hardship. Therefore, it is strongly recommended to purchase liability insurance with coverage limits that are sufficient to protect your assets and meet your state's requirements.
| Characteristics | Values | |
|---|---|---|
| What does liability insurance cover? | Bodily injury liability coverage pays other people’s medical costs when they’re injured in a traffic-related accident you cause. It covers things like medical bills, pain and suffering, lost wages, and even funeral costs. Property damage liability coverage pays for damage to other people's property after a traffic-related accident you cause. This can range from cars and fences to buildings and government infrastructure, like guardrails and road signs. It may even pay for other people’s personal belongings and a rental car for the other driver. | Liability insurance may also cover your own lawyers’ bills or court fees if you’re sued after an accident. |
| What doesn't liability insurance cover? | Liability insurance won’t pay for your or your family’s medical bills or repairs to your car — it’s only designed to pay others for the damage you cause behind the wheel. | To cover your own bills, you’ll need to get additional types of insurance, such as personal injury protection or health insurance for your medical expenses, as well as collision insurance for repairs to your vehicle. |
| What is the difference between liability insurance and full coverage? | While having liability car insurance may satisfy your state’s minimum requirements, it won’t pay for your own repair costs after an accident. | If you want more financial protection, then you can consider full coverage car insurance. Full coverage insurance isn't a specific type of policy. It’s a term used to describe a policy that combines liability insurance with comprehensive and collision coverage. The term “full coverage” is used because if you have all three coverage types, then your insurance policy will cover most scenarios, including damage to your own vehicle from an accident you cause. It’ll also cover damage caused by natural disasters or vandalism. |
| What are liability insurance limits? | Liability car insurance pays only up to the maximum amounts, or “limits,” specified in your policy. If damage from an accident exceeds those limits, you'll be responsible for paying for the rest of the claim out of pocket. | Most auto policies have three main liability limits, which are often displayed as three numbers on your policy. For example, you may see something like “25/50/25” on your car insurance declaration page. The first number is the maximum your insurance will pay for injuries to a single person after an accident. The second number is the maximum your insurance will pay for injuries to everyone you hurt in a single accident. The final number represents the maximum amount your insurance will pay for total property damage you cause. |
| How much liability coverage is needed? | Nearly every state requires at least some liability coverage. The only exceptions are rural parts of Alaska without requirements and Virginia, where residents can waive liability coverage if they pay the state $500 annually. | While many states have low liability limit requirements, you may want a higher limit to protect your savings and other financial assets if you cause an accident. Medical bills and car repairs can be incredibly expensive, and if you’re found at-fault then you’ll be responsible for the balance. |
What You'll Learn
- Liability insurance covers bodily injury and property damage
- It's recommended to have at least at least $500,000 worth of liability insurance
- Liability insurance is mandatory in nearly every state
- Liability insurance does not cover injuries to the insured or their household members
- Liability insurance is recommended for those with a high net worth
Liability insurance covers bodily injury and property damage
Liability insurance is a type of auto insurance that covers bodily injury and property damage. It is designed to protect you financially if you are found at fault for an accident. It covers the expenses of other people involved in the accident, including their medical costs, lost wages, and property damage.
Bodily injury liability coverage pays for the medical costs of other people involved in the accident, including other drivers, passengers in another car, and pedestrians. It can cover hospital fees, emergency care, follow-up visits, medical equipment, and funeral costs in the event of a fatality. It can also cover lost income if the injured person is unable to work due to their injuries. Additionally, it can cover legal fees if you are sued after causing an accident.
Property damage liability coverage pays for damage to other people's property, including their vehicles, fences, buildings, and government infrastructure. It may also cover personal belongings and rental car costs for the other driver.
Liability insurance does not cover damage to your own vehicle or your own medical expenses. To protect yourself financially in the event of an accident, it is recommended to purchase additional types of insurance, such as collision insurance and personal injury protection.
The amount of liability insurance coverage you need depends on your state's minimum requirements and your personal financial situation. It is generally recommended to have enough coverage to protect your assets in the event of a lawsuit. You may also want to consider purchasing an umbrella policy to provide additional liability coverage beyond the limits of your auto insurance policy.
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It's recommended to have at least at least $500,000 worth of liability insurance
Liability insurance is a type of auto insurance that covers the cost of damages to other people's property and injuries sustained by other people in an accident that you cause. It is mandated by law in nearly every state, with the exception of New Hampshire, South Carolina and Virginia. While these three states do not require liability insurance, they have some form of liability insurance requirements under certain conditions. For example, in Virginia, you can pay a fee of $500 to register your car as an uninsured motor vehicle.
The minimum liability insurance requirements vary by state. In California, for instance, the minimum liability insurance is $15,000 for bodily injury to one person, $30,000 for bodily injury to multiple people in a single car accident, and $5,000 for property damage. However, these amounts are often insufficient in the event of a serious accident.
It is generally recommended to have at least $500,000 worth of liability insurance to adequately protect yourself financially. This includes both property damage liability and bodily injury liability. Property damage liability covers the cost of repairing or replacing the other driver's vehicle and any other property damaged in the accident, such as buildings, fences or signal lights. Bodily injury liability covers medical expenses, lost wages, legal fees, and pain and suffering for the other driver and their passengers.
Having sufficient liability insurance is important because if the cost of the accident exceeds your insurance coverage limits, you will be responsible for paying the remaining amount out of pocket. This can result in significant financial hardship, especially if there are multiple injuries or extensive property damage.
In addition to liability insurance, it is also recommended to have other types of auto insurance, such as collision and comprehensive coverage, to protect your own vehicle in the event of an accident.
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Liability insurance is mandatory in nearly every state
Liability insurance is a requirement for drivers in nearly every state in the US. It is a type of insurance that covers the costs of injuries and property damage caused by the policyholder in a car accident. In other words, liability insurance helps to protect drivers from the financial burden of being at fault for an accident. The only states that do not require liability insurance are New Hampshire and Virginia, and even these states have alternative requirements in place to ensure drivers can cover the cost of accidents.
Liability insurance consists of two types of coverage: bodily injury liability and property damage liability. Bodily injury liability covers the medical expenses of those involved in the accident, including emergency and ongoing medical expenses, loss of income, and funeral costs. Property damage liability covers the costs of repairing or replacing the vehicles of other drivers involved in the accident, as well as any other property damaged, such as fencing, mailboxes, or buildings.
Liability insurance is important because it helps to ensure that those involved in a car accident can get their medical expenses and property repairs paid for. Without liability insurance, drivers may struggle to afford these costs, especially if the accident results in serious injuries or significant property damage.
If you choose to drive without the required liability insurance, you may face legal consequences. These consequences vary by state but often include fines, suspension of your driver's license, and even jail time for repeat offenses. In some states, you may also be required to pay a surcharge or fee if you are found to be at fault in an accident without insurance.
The amount of liability insurance you need will depend on the requirements of your state, as each state sets its own minimum coverage limits. However, it is generally recommended to purchase more than the state-mandated minimum to ensure you have sufficient coverage in the event of a serious accident. You may also want to consider purchasing additional types of insurance, such as collision and comprehensive coverage, to protect yourself from financial risks.
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Liability insurance does not cover injuries to the insured or their household members
Liability insurance is a mandatory part of car insurance in most states. It covers injury and damage caused by the policyholder in a car accident, along with the cost of defending or settling lawsuits brought against them as a result. Liability insurance is broken down into two categories: bodily injury liability and property damage liability.
Bodily injury liability covers the cost of other parties' injuries that are caused by the policyholder in an at-fault accident. This includes emergency care, continued medical costs, and lost wages. However, it is important to note that bodily injury liability does not cover injuries to the insured or their household members. This means that if the policyholder or someone in their household is injured in an accident, they cannot make a claim under their own liability insurance policy. Instead, they would need to rely on their own health insurance or personal injury protection to cover their medical expenses.
Property damage liability covers the cost of damage to other parties' property caused by the policyholder in an at-fault accident. This includes damage to other vehicles, buildings, guardrails, utility poles, and fences. It also covers the cost of a rental vehicle for the other party while their vehicle is being repaired. However, property damage liability does not cover damage to the policyholder's own vehicle or to a vehicle owned by a household member. To cover repairs to their own vehicle, the policyholder would need collision coverage.
While liability insurance provides important coverage for at-fault drivers, it is important to remember that it does not cover all costs associated with an accident. For example, liability insurance typically does not cover damage caused by intentional acts or injuries to passengers in the policyholder's vehicle. Additionally, liability insurance does not cover the policyholder's own vehicle damage in an at-fault accident. To have comprehensive coverage, drivers may need to purchase additional types of insurance, such as comprehensive, collision, and personal injury protection.
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Liability insurance is recommended for those with a high net worth
Liability insurance is designed to protect you financially in the case that you need to pay for damages or injuries caused to others. If you have a high net worth, it is likely that you will be able to cover the costs of an accident or damage without insurance. However, liability insurance can protect your assets in the case of a lawsuit.
For example, if you are found at fault for an accident, you are legally responsible for paying for the damage you have caused. This can include medical bills, lost wages, and property damage. If your liability insurance coverage is not high enough, you could be held personally responsible for anything above your liability limits, and the people you have injured could sue you for this money.
Therefore, it is recommended that those with a high net worth have enough liability insurance to cover their net worth. This will help to protect your assets in the case of a lawsuit. Additionally, if you have a lower net worth, there is less incentive for someone to sue you, so you may not need as much coverage.
It is important to note that liability insurance will not cover your own medical bills or repairs to your property. To cover these costs, you will need additional types of insurance.
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Frequently asked questions
Liability insurance covers other people’s expenses when you cause an accident. It has two main components: bodily injury liability coverage and property damage liability coverage. Bodily injury liability coverage pays other people’s medical costs when they’re injured in a traffic-related accident you cause, while property damage liability coverage pays for damage to other people's property after a traffic-related accident you cause.
Nearly every state in the US mandates drivers to have state minimum liability coverage. The only exceptions are rural parts of Alaska without requirements and Virginia, where residents can waive liability coverage if they pay the state $500 annually.
While many states have low liability limit requirements, you may want a higher limit to protect your savings and other financial assets if you cause an accident. It is generally recommended to get enough liability insurance to cover your net worth.
The national average car insurance cost of minimum car insurance, which typically includes liability auto insurance and other state-mandated coverage, is $493 per year, according to NerdWallet’s June 2024 rate analysis. This rate goes up to $738 per year, on average, if you have an at-fault accident on your record.
