Liability Coverage: Understanding Auto Insurance Minimums

Liability car insurance is a legal requirement for drivers in nearly every state. It covers the cost of damage to other people's property and their medical expenses if you cause an accident. However, it does not cover your own vehicle repairs or medical bills. The minimum liability coverage required varies by state, with common minimums of $25,000 per person and $50,000 per accident for bodily injury, and $25,000 for property damage. It's recommended to purchase higher coverage limits than your state's minimum to protect your assets in the event of a lawsuit.

What does liability insurance cover?

Liability insurance covers the costs of damage to other people's property and injuries to other people when you are responsible for a covered accident. This means that if you are found legally liable for an accident, liability insurance will cover the costs of repairing the other driver's car and their medical bills. It will also cover the costs of repairing or replacing property damaged in the accident, such as a fence, a building, or a tree. In addition, liability insurance can cover your legal defence and court costs if you are sued as a result of an accident.

Liability insurance is divided into two main categories: bodily injury liability coverage and property damage liability coverage. Bodily injury liability coverage helps pay for the medical costs of people injured in an accident, including medical bills, pain and suffering, lost wages, and funeral costs. Property damage liability coverage helps pay for the repair or replacement of property damaged in an accident, such as cars, buildings, fences, or government infrastructure.

The minimum amount of liability insurance coverage required varies by state. For example, in Texas, the minimum coverage is $30,000 for injuries per person, up to a total of $60,000 per accident, and $25,000 for property damage. In New York, the minimum coverage is $25,000 per person and $50,000 per accident for bodily injury, and $10,000 for property damage. It is important to note that liability insurance does not cover repairs to your own vehicle or your own medical bills; separate coverage is needed for those expenses.

What liability auto insurance doesn't cover

Liability auto insurance provides financial protection if you are responsible for someone else's injuries or property damage. It covers the costs of the other driver's property and bodily injuries if you are found at fault in an accident. However, it is important to note that liability insurance does not cover certain things. Here are some examples of what liability auto insurance typically does not cover:

• Your own injuries or damage to your own vehicle: Liability insurance only covers the other party's injuries and property damage. If you want coverage for your own injuries and vehicle repairs, you will need to purchase additional coverages such as collision coverage, comprehensive coverage, or medical payments coverage.
• Intentional damage: Liability insurance does not cover damages that you intentionally caused.
• Attorneys' fees: If you are sued due to an accident, liability insurance will not cover your attorneys' fees.
• Accidents in certain locations: Liability insurance may not cover accidents that occur in other states, Canada, or Mexico. If you plan to drive outside of your home state or country, you should check with your insurance provider to understand your coverage options.
• Business use: Liability insurance typically does not cover accidents that occur while you are driving for business purposes.
• Rental cars: If you are driving a rental car, your personal liability insurance may not cover accidents. However, some rental agencies offer liability policies that you can purchase separately.
• Uninsured or underinsured motorists: If you are in an accident with a driver who does not have insurance or does not have enough insurance to cover the damages, your liability insurance will not cover the costs. You may need to purchase additional coverage, such as uninsured/underinsured motorist coverage, to protect yourself in these situations.
• High-value items: Liability insurance has dollar limits on the amount it will pay out for property damage. If you cause damage to high-value items, such as luxury vehicles or expensive property, the liability coverage may not be sufficient to cover the full cost of repairs or replacement.

Liability car insurance limits

Liability car insurance covers the costs of damage to other people or their property in an accident where you are at fault. This includes bodily injury liability coverage, which covers the medical costs of others injured in the accident, and property damage liability coverage, which covers the costs of repairing damage to other people's property.

Liability insurance does not cover the costs of repairing your own vehicle or your own medical costs. For this, you would need additional insurance, such as collision insurance or personal injury protection.

Nearly every state in the US requires drivers to have at least some liability coverage, except for Virginia and specific parts of Alaska. The minimum liability coverage required varies by state, but it typically includes a maximum amount that the insurance company will pay per person for bodily injuries, a maximum amount that the insurance company will pay in total for bodily injuries per accident, and a maximum amount that the insurance company will pay for property damage per accident. For example, in Texas, the minimum liability coverage is $30,000 of coverage for injuries per person, up to a total of $60,000 per accident, and $25,000 of coverage for property damage. This is known as 30/60/25 coverage. In New York, the minimum coverage is $25,000 per person and $50,000 per accident for bodily injury liability, and $10,000 for property damage liability.

The minimum liability coverage may not be sufficient to cover all the costs of a serious accident, so it is recommended to purchase higher coverage limits than your state requires. This is especially important if you have a high net worth, as you could be sued for any costs that exceed your liability limits. Umbrella insurance can provide additional liability coverage beyond what your auto insurance carrier normally allows.

How much liability coverage you need

The amount of liability coverage you need depends on a number of factors, including your state's minimum requirements, your net worth, and the value of your car.

State Minimum Requirements

Nearly every state in the US requires drivers to have at least some liability coverage, except for specific parts of Alaska and Virginia. The minimum liability coverage varies by state, with common minimums of $25,000 per person and $50,000 per accident for bodily injury, and $25,000 for property damage. However, these limits can be as low as $15,000 per person and $30,000 per accident for bodily injury, and as low as $5,000 for property damage.

Net Worth

It is recommended that you have enough liability coverage to protect your net worth, which includes the value of your cash, investments, and assets, minus your debt. This is because if you are found at fault in an accident and the damages exceed your liability limits, you could be held personally responsible for the remaining costs. If you are unable to pay, there could be consequences such as garnished wages, liens against your assets, or court fees.

Value of Your Car

If you total another person's car in an accident and your property damage liability limit is not high enough to cover the cost of the car, you will be responsible for paying the difference out of pocket. Therefore, it is important to consider the value of the cars you could potentially damage and ensure your property damage liability limit is sufficient.

Recommended Coverage

While state minimums are a good starting point, it is generally recommended that drivers consider purchasing higher coverage limits than their state requires. Most experts recommend having liability coverage of 100/300/50 for a "full coverage" policy. Additionally, if your auto insurer does not offer liability limits high enough to cover your net worth, you may want to consider purchasing an umbrella policy, which can provide additional liability coverage.

How much liability insurance do I need?

The amount of liability insurance you need depends on several factors, including your state's requirements, your net worth, and the level of risk you're comfortable with.

State Minimum Requirements

Nearly every state in the US requires drivers to carry a minimum amount of liability insurance, which covers expenses for others in the event that you cause an accident. The specific requirements vary by state, so be sure to check the laws in your state. For example, in Texas, the minimum liability coverage is $30,000 per person for injuries, up to a total of $60,000 per accident, and $25,000 for property damage. In New York, the minimum requirements are $25,000 per person and $50,000 per accident for bodily injury, and $10,000 for property damage.

Net Worth

When deciding how much liability insurance to purchase, it's important to consider your net worth. This includes the value of your cash, investments, and assets, minus your debt. If you have a high net worth, you may want to purchase higher liability limits to protect your assets in the event of a lawsuit. As a general rule, consider purchasing enough liability insurance to cover your net worth.

Risk Tolerance

Another factor to consider is your tolerance for risk. If you feel that the state minimum requirements are not sufficient to cover potential expenses in the event of an accident, you may want to purchase higher liability limits. Keep in mind that medical bills and car repairs can be very expensive, and if you're found at fault for an accident, you will be responsible for any costs that exceed your liability limits. On the other hand, if you have a low net worth and are comfortable with the state minimum requirements, you may decide that additional coverage is unnecessary.

Full Coverage Insurance

While liability insurance is required in most states, it only covers expenses for others and does not cover repairs to your own vehicle. If you want more comprehensive protection, you may want to consider purchasing full coverage insurance, which includes liability, comprehensive, and collision insurance. This type of policy will cover most scenarios, including damage to your own vehicle from an accident you cause, as well as damage caused by natural disasters or vandalism.

Umbrella Policies

If you have a high net worth or are exposed to a significant amount of risk, you may need more liability coverage than what is typically offered by auto insurance companies. In this case, you can consider purchasing an umbrella policy, which provides additional liability coverage beyond the limits of your auto and home insurance policies.

In summary, the amount of liability insurance you need depends on your state's requirements, your net worth, and your tolerance for risk. Be sure to review your insurance policy regularly and adjust your coverage as needed to ensure you have adequate protection.

Frequently asked questions