Liability Insurance: What It Covers & How To Find the Best Option

September 19, 2023

If you live in the USA and drive a car, it’s extremely likely that you visited an insurance company before or immediately after buying a vehicle. Since the number of yearly occurring car accidents is frightening (scroll down to see a few impressive figures and quick facts), auto insurance has long become a must. You can have cheap car insurance, but you definitely can’t do without one. Liability insurance is one of the basic types of insurance coverage.

What Is a Liability Insurance?

Unlike personal injury protection, which will cover your medical expenses after a car accident, no matter who exactly caused it, liability car insurance pays out if it is you who is at fault.

In other words, it guarantees that if the court finds you guilty of causing a car crash while driving your car, you will be able to pay damages under the court order. Liability car insurance coverage also protects you financially if someone else causes an accident when driving your car.

A Must for Every U.S. Driver?

Drivers are required to have at least a minimum liability car insurance coverage in most of the U.S. states except New Hampshire, Virginia, and South Carolina. In New Hampshire, motor vehicle laws don’t require people to carry auto insurance. Still, every driver must prove that in the event of an “at-fault” accident, they can meet New Hampshire’s financial responsibility requirements. In Virginia and South Carolina, you’ll have to pay an uninsured motorist fee. Each state has its insurance department or division that oversees insurance-related matters and provides information on the requirements and regulations. Insurance requirements vary from state to state and may change over time. The most up-to-date information is available from the official source, i.e., the official website of the state’s insurance regulatory authority. Also, there are web resources that aggregate information related to insurance. For example, in this Forbes piece, you can find the minimum car insurance liability coverage, which you must have to drive in each state of the USA.

What Liability Car Insurance Covers

As a rule, it covers the expenses associated with the damages you have caused while driving your car, plus the legal claims. Car insurance liability coverage typically consists of two parts:

  • Bodily injury liability: It covers medical expenses of the other injured party or parties plus legal fees.
  • Property damage liability: It covers the repair or replacement costs if another person’s property gets damaged.

What It Doesn’t Cover

Liability car insurance usually doesn’t cover the following:

  • Any damage to your vehicle
  • Your injuries
  • The injuries your passengers have suffered due to the accident

Some Examples of Situations Where Liability Insurance Would Pay Out

Here are a few situations when other people’s damages will be paid out from your liability car insurance:

  • You rear-end some other car at a stop sign.
  • Your car collides with a pedestrian crossing the street.
  • You cause a car crash by running a red light.
  • Your vehicle swerves and damages a storefront.
  • You side-swipe a parked car while parking.
  • Your car crashes into a fence or a guardrail.
  • You fail to yield and collide with another vehicle.
  • Your car hits a cyclist on the road.
  • You cause an accident by making an unsafe lane change.
  • Your vehicle damages someone’s property while driving on private premises.

Car Insurance Explained in Plain Words

How does car insurance work? What is liability insurance? What is limit of liability insurance? Get answers to these and many other questions in a few minutes by watching this YouTube video:

What Is the Limit of Liability Insurance?

When buying liability car insurance, you should be aware of its limits. The limit of liability insurance definition is the following: it is the maximum dollar amount of damages (i.e., indemnity), which your insurance company will pay on your behalf for the covered claims under the insurance policy. This limit is typically represented as three numbers. For instance, the minimum liability requirements in Washington are 25/50/10. These numbers stand for:

  • 25: your policy must include bodily injury liability coverage of at least $25,000 per person.
  • 50: your bodily injury liability should be no less than $50,000 per accident.
  • 10: your property damage liability must be $10,000 or more per accident.

Remember that each state sets minimum liability limits drivers must meet to comply with the law.

Other Types of Coverage

People’s needs differ, and so do their preferences when it comes to coverage for car insurance. Be careful when choosing the policy. Getting into a car accident is far from a positive experience, but people who suffered from it could be consoled that at least their car insurance covered the costs. As we have already mentioned, there are several other types along with liability coverage. Let’s remember what expenses each of them covers. Examples in plain language will help you understand when exactly each of these coverages comes to the rescue.

Name  What It Covers When It Pays Out (examples)
Collision coverage The cost of your vehicle’s repairs or replacement in case of a collision (no matter who is at fault), as well as damages from a single-vehicle accident (i.e., with no other car involved)
  • You collide with another vehicle on the road.
  • You hit a tree, lamppost, or stationary object.
  • Your vehicle rolls over during an accident.
  • Your car is damaged due to hitting a pothole or road debris.
  • You crash into a fence, wall, or guardrail.
  • Your car gets damaged in a hit-and-run incident.
  • You collide with an animal, such as a deer or a dog.
  • Your car was damaged in a parking lot accident.
Medical payments coverage (MedPay) The medical costs for you, your passengers, and potentially other parties involved in the accident, no matter who is at fault. You or your passengers need any of the following:
  • Emergency medical services
  • Hospitalization, surgical, and medical treatments
  • Doctor visits, including follow-up appointments
  • X-rays, lab tests, and diagnostic procedures
  • Prescription medications
  • Rehabilitation and physical therapy
  • Funeral expenses in the unfortunate event of a fatal accident.
Full Coverage Car Insurance Combines liability insurance, MedPay, collision coverage, non-collision incidents, etc.
  • You cause a car crash
  • Another driver causes a car crash
  • Your car suffers from a fire, hail, a fallen tree, etc.
  • Your car gets stolen from your driveway
  • Unknown vandals damage your vehicle.
  • And many more.
Personal injury protection (PIP) Medical expenses and related costs for you and your passengers, no matter who caused the car crash.
  • You or your passengers need medical treatments due to injuries sustained in a car accident.
  • You require rehabilitation and therapy after the accident.
  • You or your passenger dies in a fatal accident.
Roadside coverage Costs of common roadside services
  • Your car gets a flat tire and needs assistance.
  • Your car battery dies, and you need a jump-start.
  • You require a towing service after a breakdown.
  • Your car runs out of fuel, and you need fuel delivery.
Uninsured motorist coverage Your expenses in case the other driver is at fault and doesn’t have insurance
  • Another driver crashes into your car and leaves the scene (hit-and-run).
  • The at-fault driver in an accident does not have insurance.
  • The driver responsible for the accident has inadequate insurance to cover the damages.
Additional liability insurance (Personal umbrella policy) Extra costs beyond the limits of your primary auto insurance policy. You may need it when you want increased protection against potential legal claims or damages that exceed your standard policy limits.
  • You are sued for damages after a major car accident.
  • Your guest is injured while visiting your property, and a lawsuit is filed.
  • Your dog bites someone, resulting in a liability claim.
  • Your teenage driver causes a severe accident with multiple injuries.
Rental reimbursement coverage Covers the cost of renting a car or other transportation expenses while your vehicle is being repaired after a collision
  • Your car is in the repair shop, and you need a rental car for transportation.
  • While on vacation, your rental car is damaged, and you need reimbursement.
  • Your car is stolen, and you require a temporary replacement vehicle.
  • Your car is being repaired after an accident, and you need a rental car.

How To Find the Cheapest Liability Car Insurance for You

The average liability car insurance coverage cost may vary from state to state and even company to company. Besides, people need different car liability insurance coverage depending on age, lifestyle, etc. If your budget is tight and you are searching for cheap liability car insurance coverage, you may want to compare car insurance quotes from multiple providers. Request for several auto liability insurance quotes. The more, the better. One more tip to remember when requesting a quote: liability insurance companies should be reputable. Also, if you want to compare many offerings simultaneously, looking for liability insurance online would be reasonable. Many sites provide liability insurance quotes or even aggregate them from multiple sources. For instance, look at the rating compiled by Forbes: Cheapest_Car_Ins_Comp Source: Forbes Advisor

Why Everybody Should Insure Their Cars: Some Statistics and Quick Facts

When getting a new car, most of us don’t think of car accidents at this happy moment. Alas, they happen. So, don’t become a part of these statistics – drive carefully and, of course, get liability insurance for your car.

Frequently Asked Questions

How can I find out the minimum car insurance liability coverage I should have to drive in my state?

To find out how much liability insurance you need, simply call or email the Department of Insurance or the Department of Motor Vehicles in your state. You can also ask a licensed insurance agent in your area for advice. One more way is to search the web for information.

Why is liability insurance so cheap compared with other types?

Liability insurance is generally the cheapest coverage because it only covers the costs of bodily injuries and property damages for another party if you’re at fault for an accident, not for you.

My question is about liability car insurance vs. full coverage. Whom each of these options will suit best?

Full coverage car insurance will be the best for drivers who want comprehensive protection and are willing to pay higher premiums. As a rule, they have a newer or more valuable vehicle. 
Liability car insurance is best suited for budget-conscious drivers who prioritize meeting minimum legal requirements. Usually, these people drive older or inexpensive vehicles. In other words, if you want cheap car insurance — liability only is what you need. 
If you opt for liability only, car insurance costs will be lower for you, but bear in mind that it doesn’t cover damages to your vehicle or your medical expenses. If you are injured in an accident, you’ll have to pay out of pocket. It’s up to you to decide and answer the question, “How much car insurance do you need?”

I found out that my friend got a cheaper offer from the same provider than me for the same liability insurance coverage; car he drives is of the same make and model. Why do I have to pay more?

Average liability car insurance cost depends on a number of factors, such as age, driving record, etc. The cheapest liability insurance for car drivers with a good reputation offers lower premiums. At the same time, those who once were punished for drunk driving are likely to pay much higher premiums for the same car liability insurance coverage.

Victoria Berezhetska

Victoria Berezhetska is a Content Lead at Phonexa.com and an expert contributor to CoverExplore. She has a Bachelor of Science degree in Business Administration, with extensive working experience as a PR specialist and content writer. At CoverExplore, she helps customers find the right educational material through easily digestible blog posts and buying guides backing their insurance coverage choice. Victoria covers diverse topics around digital and insurance marketing, including auto, home, health, and life insurance.

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