Liability car insurance is the most important part of your car insurance policy. If you are at fault for an accident, your liability insurance covers the cost of damage you cause to someone else’s car and their medical expenses if they sustained injuries.
Liability insurance is one of the most crucial components of car insurance. Every state that mandates car insurance requires drivers to have a minimum amount of liability coverage
If you are at fault for an accident, liability coverage can pay for damages to the other driver’s car or injures they or their passengers sustained
It’s a good idea to buy more liability insurance than just your state’s minimum, so you’re not on the hook for paying tens of thousands of dollars out of pocket after an accident
If someone borrows your car, your liability coverage also extends to them, so if they get into an accident while driving your car, your liability insurance would cover damage they caused
Liability car insurance is the most crucial component of your car insurance policy, providing coverage in the event that you cause an accident and hurt someone or damage their property. Every state that requires car insurance mandates that you have bodily injury and property damage liability coverage, and there are a couple reasons for this.
Car accidents are expensive, running into the tens and sometimes hundreds of thousands of dollars in repairs, medical bills, legal costs, property damage, and lost wages (if the person you injure is forced to miss work). A worst-case scenario without car insurance could potentially bankrupt the at-fault individual if they’re sued or forced to pay for damages. And worse, the onus may be on the person with insurance to cover the expenses caused by the at-fault individual, which, if they don’t have uninsured liability coverage, they may have to pay out-of-pocket.
Knowing what the different types of liability insurance covers and how much liability insurance you need is essential when buying car insurance. You don’t want to be over-insured but you also don’t want to be underinsured in the event of a car accident.
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Car insurance policies are made up of different types of coverage, that offer different forms of protections. Liability coverage itself is broken into two categories:liability insurance for bodily injury, and liability insurance for property damage. There’s also uninsured/underinsured motorist liability coverage. Those terms may sound confusing, but here’s what they each mean:
Bodily injury liability insurance doesn’t cover you or your car directly, but it does cover the other person in the accident if you’ve caused a car accident that resulted in injuries to other drivers. It protects you against the injured party’s claims for damages after an injury, such as medical expenses, lost wages, pain and suffering and sometimes legal fees. What exactly is covered varies from state to state and policy to policy.
One rule of thumb for prospective buyers is to purchase the highest bodily injury liability coverage limit you can afford. If your coverage isn’t enough to pay for all injury-related costs in an accident you caused, you are susceptible to lawsuits for the remainder of what you owe out, putting financial assets (like your home) in jeopardy.
Property damage liability coverage pays for the damage you cause to someone else’s property. This type of liability coverage does not cover your own vehicle. To get coverage for your own car, you need to add on collision coverage or comprehensive coverage.
Typically, property damage liability insurance covers repair and/or replacement for damage you caused to the other person’s vehicle, house, buildings, lampposts and telephone poles. Exactly what specific types of property is covered varies according to your policy and coverage amount, so be sure to read the contract carefully or talk to your insurance agent.
Uninsured motorist coverage protects you directly. Unlike the two parts of standard liability coverage, uninsured motorist coverage can actually cover damage to your own vehicle or injuries you’ve suffered.
If someone crashes into you, or hits you, or you’re injured in a hit-and-run and there’s no liable party to file the claim, you’re paid for medical expenses under this coverage. This type of liability coverage takes the place of the insurance the other driver should have had, but didn’t.
Like uninsured motorist coverage, underinsured motorist coverage also protects you directly, except this component applies when the other driver has coverage, but not enough to cover the liability expenses caused by the damage you sustained. Underinsured motorist coverage pays you an additional amount up to whatever limits you chose for your policy.
Like standard liability insurance, uninsured and underinsured motorist coverage has two coverage types: bodily injury and property damage, and is more specifically referred to as uninsured/underinsured motorist bodily injury coverage (UMBI) and uninsured/underinsured motorist property damage coverage (UMPD).
Because there are people cruising around without insurance, some states now require drivers to have at least some form of uninsured motorist coverage, if not both uninsured and underinsured motorist coverage. But even if it isn’t law, you should still consider adding this helpful piece of coverage to your car insurance policy to avoid paying for out-of-pocket expenses in the event that you get into an accident with an uninsured or underinsured driver.
Liability coverage is sold taking three liability instances into account: the maximum amount you’ll need to cover a single person’s injuries; the maximum amount you’ll need to cover multiple people’s injuries; and the maximum amount you feel you’ll need to cover the total property damage in an accident. They are typically displayed as three amounts separated by slashes, so if you purchase liability coverage that looks like 50/200/50, that would mean you have coverage of:
$50,000 in bodily injury liability per person
$200,000 in total bodily injury liability per accident
$50,000 in property damage liability per accident
It’s generally suggested that you spend more on liability insurance if you don’t think you can afford a hefty medical bill, and many states require liability coverage in the range of $25,000 to $50,000. It's important to ask yourself, how much can I afford to pay out-of-pocket if I get into an accident?
And although state minimums will usually cover routine fender benders, accidents involving serious property damage, injuries, or even fatalities could end up being too high for you to afford to cover the rest on your own after the minimum is paid out.
Property damage is indeterminable and it’s generally difficult to put a price on this type of coverage, so make sure you plan ahead and consider every scenario when setting a maximum for your policy. Be sure to purchase the coverage amount you feel comfortable with and find affordable.
In “no-fault” states, there is no need to determine who was at fault for an accident to receive payments for injury claims. No-fault liability car insurance — currently law in 12 states — requires each party file a claim with their individual insurer, which limits lawsuits, but understandably brings questions of fairness into the fold, as irresponsible motorists are sometimes said to get off “scot-free.” While no-fault states don’t completely eliminate the chances that faulty drivers will get sued, it does limit the circumstances under which they can be sued.
Residual bodily injury liability coverage extends the financial protections offered by no-fault insurance if the accident results in a lawsuit. Individuals or companies with a base no-fault policy can expect their carrier to pay its claims for injuries, damages, or accident-related lawsuit expenses under personal injury protection (PIP). However, this has its limits, and won’t protect against lawsuits or accidents that run too high and exceed their threshold. Residual liability insurance offers increased protection in the event that multiple people are affected by an accident and it results in several injuries or death.
If you want coverage for vehicular liability but you don’t own a car, there are a few coverage options for you besides the supplemental liability coverage offered by a rental car company.
This type of coverage is valuable if you drive other people’s cars around often, but don’t have your own car. It primarily covers liability — bodily injury and property damage — and is fairly limited beyond that, as personal injury protection (covers medical expense you incur as the result of an accident you caused) and uninsured/underinsured motorist coverage aren’t always offered on non-owner car insurance policies.
The car owner’s auto insurance policy will generally cover you while you’re driving their vehicle — even if they’re not with you — but only up to a certain limit, so if you get into a bad accident and it exceeds what their policy will pay out, the rest may be on you. Non-owner car insurance acts as an extension of the car owners existing policy, and will cover the rest if accident costs are excessive. It also may be a good idea to get non-owner liability coverage if you rent for, say, a week or more per year. Supplemental liability insurance that rental cars offer is often more expensive and it offers less protection than non-owner car insurance.
Non-owner liability car insurance is probably not necessary if you borrow cars infrequently, such as a couple times a year for a day or two at a time. Going through the trouble of taking out an entire policy and paying premiums throughout the year just isn’t worth it.
If you live with someone, whether they are a family member or a roommate, and you borrow their car often, you should ask to be added to their car insurance policy. This is generally pretty quick and easy to do. In fact, many insurers require all licensed drivers living in a household be on a policy.
Most car insurance policies also extend to rental cars, but you’ll want to talk with your insurance company to determine if the coverage suffices or whether you should add on to your current policy if you’ll be renting cars frequently or for extended periods. If you’re unfamiliar with a car you’re renting, or if an individual on your policy is renting a car, you may feel more at ease increasing the liability limit, as being unfamiliar with a car may make you or your family member more at-risk for accidents.
Rental car companies are actually required by law to carry a state’s minimum amount of liability insurance coverage on their cars, so they offer their own liability insurance for a small, per-day fee to cover damage to someone else’s car and/or its passengers in an accident. They sell it as supplemental liability insurance (SLI) and it runs about $8 to $12 a day. If you rent a car and don’t have car insurance, it’s strongly suggested that you add on SLI.
About the authors
Pat Howard is an Insurance Editor at Policygenius in New York City, specializing in homeowners insurance. He has been featured on Property Casualty 360, MSN, and more. Pat has a B.A. in journalism from Michigan State University.
Kara McGinley is an Insurance Editor at Policygenius. She previously worked as a freelance writer and a copywriter for various startups. Her work can be found in Teen Vogue, The Culture Crush, Mask Magazine, and more.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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