Top Liability Insurance Coverage: What You Need to Know

Liability insurance is one of the top auto insurancecoverages required in the majority of states, and it is an important coverage that protects you if you cause an accident. It is important to ensure you carry the right amount of coverage to protect yourself. Otherwise, you could be liable for huge bills if you cause an accident that exceeds your liability insurance. 

Continue reading to learn everything you need to know about this important coverage, from what it covers to how much auto insurance do you need to carry. 

What Liability Insurance Covers 

If you cause an accident, liability insurance will protect you by paying for other parties’ bills. However, liability insurance consists of two parts that may be sold separately or together, so you will need to check if you have both coverage options for full protection. We’ve explained the two components of liability insurance below. 

Bodily Injury Liability Insurance 

Bodily injury liability insurance will pay for other parties’ injuries after you cause an accident. It usually covers medical bills and rehabilitation treatment if injuries are serious. It may also cover lost wages, child care, and funeral costs. 

Because medical bills can quickly add up, especially for serious injuries, your liability insurance limit may quickly run out if you seriously injure someone. Therefore, we recommend carrying more than just a small amount of bodily injury liability insurance to avoid being financially responsible for bills beyond your liability insurance limit after a serious accident. 

Property Damage Liability Insurance 

Property damage liability insurance works like bodily injury liability insurance. However, when you cause an accident, it will pay for others’ property damage bills. This could be another person’s car you crashed into or the mailbox you backed into. It will also cover lawyer bills and court fees if you are sued after an accident. 

However, as with bodily injury liability insurance, there is a limit on how much property damage liability insurance will cover. Therefore, if you have a low limit on your property damage liability insurance, you will be on the hook for any bills that exceed that amount. 

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What Liability Insurance Doesn’t Cover 

Because liability insurance is intended only to cover others’ accident bills after you cause an accident, there is a lot that liability insurance won’t cover. Some of the things that liability insurance won’t cover include the following: 

• Any damages to your own vehicle 
• Any injuries to you or your passengers 
• Any expenses that go beyond your liability policy limits 

If you want the expenses above to be covered, you will need to invest in other auto insurance coverages. Some of the auto insurance coverages you should consider include the following: 

• Collision auto insurance. Collision insurance will pay for your car’s repairs up to the policy limit if you crash into another vehicle or an object. 
• Comprehensive auto insurance. Comprehensive auto insurance will pay for your car’s repairs up to the policy limit if you hit an animal or weather conditions, vandalism, or theft damage your car. 
• Medical payments (MedPay) auto insurance. MedPay will pay for you and your passenger’s medical bills up to the policy limit if you are injured in an accident. It will pay for medical bills regardless of who caused the accident. (For more information, read our  “What is medical payments coverage in car insurance?“).
• Personal injury protection (PIP) auto insurance. PIP will pay for you and your passenger’s medical bills up to the policy limit if you are injured in an accident, regardless of who caused it. It will also cover lost wages, child care, and other expenses related to injuries. 
• Uninsured/underinsured motorist auto insurance. Uninsured/underinsured motorist auto insurance will help pay your accident bills. Uninsured motorist coverage is a type of auto insurance that protects you if you’re involved in an accident with a driver who doesn’t have insurance or doesn’t have enough to cover the damages. It helps to cover medical expenses and property damage resulting from the accident.

The coverages above are all valuable auto insurance coverages to have in case of an accident. If you are concerned about the price of adding these insurance coverages, there are plenty of ways you can work to reduce your auto insurance rates, such as shopping around for auto insurance quotes or applying for auto insurance discounts. Take a look at our comprehensive U.S. insurance providers list to see what your options are for companies. 

Read more:

• Service American Indemnity Company Review
• Top Payment Protection Insurance Coverage: What You Need to Know

Do you need liability auto insurance coverage? 

Yes, you must carry liability insurance to drive legally. Most states will require you to carry one or both types of liability insurance. In states where liability insurance isn’t required, you must provide proof of your financial ability to pay for accident costs. It is usually better and cheaper to carry liability insurance than opting out. 

State Liability Requirements 

Each state has different requirements for the liability insurance drivers must carry. Some states may only require a low limit of property damage liability insurance, whereas other states may require both liability coverages in high amounts. Look at the table below to see what liability insurance you need to carry in your state. 

Auto Insurance Minimum Requirements Per State

Liability insurance will be cheaper in some states, depending on the required liability amounts. However, even if low-liability insurance is required in your state, we recommend carrying more if you can afford to do so. If you exceed your liability amounts, you will have to pay out of pocket, so carrying higher amounts better protects you financially if you cause an accident. 

Deciding How Much Liability Insurance You Need 

When deciding how much liability insurance you need, you’ll first need to consider your state’s liability auto insurance requirements. You must carry what your state requires, which will determine your baseline liability auto insurance coverage. 

The next thing to consider is your own personal finances. If you have enough money to pay off other drivers’ medical bills and property damage bills without it being a huge financial hardship, then you will likely be okay with carrying just your state’s minimum liability insurance. 

However, if you don’t have enough money to cover huge accident bills adequately, you should increase your liability auto insurance amounts, especially if your state’s limits are low. If your state only requires drivers to carry a $5,000 limit for property damage insurance, you will be on the hook for any costs beyond $5,000, which is very easy to exceed in serious accidents. 

For example, if you total someone else’s $20,000 car, you would be on the hook for $15,000. If you are unable to pay, the other driver may sue you for the remaining amount. Therefore, paying a little extra every year is worth it to avoid financial stress if you cause a serious accident. 

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The Cost of Liability Auto Insurance Coverage 

So how much will liability auto insurance set you back every year? It depends on how much you are required to carry, your driving record, and other factors. The table below will give you a basic idea of liability insurance costs. 

Average Monthly Minimum Coverage Rates for the Top Auto Insurance Companies

Some states will have higher average rates for liability insurance. This could be because they require higher limits, but it also could be because the state has more crashes on average. If you live in a state with higher average rates, shop around to ensure you get the best deal on your liability auto insurance coverage. 

Read more:

• How Much Auto Insurance You Should Have
• Cheap Liability Auto Insurance

How can I reduce my liability auto insurance rates? 

There are a number of ways you can reduce your auto insurance rates to make liability auto insurance more affordable. Some of our best tips are as follows: 

• Buy a car that is cheaper to insure. Insurance companies often charge less for cars that have easy to find and cheap parts, as well as cars with good safety ratings for crash performances. 
• Get auto insurance discounts. Make sure you take advantage of all the discounts your auto insurance company offers. 
• Get plenty of insurance quotes. Make sure to shop around and get auto insurance quotes every year to ensure you still get the best auto insurance rate in your area. 
• Improve your credit score. Most states allow auto insurance companies to charge drivers with poor or fair credit scores more than drivers with good credit scores. So improving your credit score can help reduce your rates at your next renewal. 
• Keep a clean driving record. Having a clean driving record and driving safely will ensure low rates, as insurance companies will see you as low risk to insure. 
• Raise your insurance deductible. If need be, you can raise your insurance deductible, which is the amount you agree to pay toward repairs after an accident. Just don’t raise it to an amount you wouldn’t be able to pay out of pocket. 

Drivers who follow the tips above can usually reduce their auto insurance rates by at least a little bit, making liability auto insurance more affordable. 

Case Study 1: Protecting Small Business Assets

In this case, a small construction company faced a lawsuit when a client’s property was damaged during a renovation project. The company had liability insurance coverage in place, which helped cover the costs associated with the legal defense and eventual settlement. Without this coverage, the financial implications could have jeopardized the company’s assets and survival.

Case Study 2: Medical Malpractice Coverage

Consider the case of a healthcare professional who provided medical services to a patient and unintentionally caused harm. The patient decided to file a medical malpractice lawsuit seeking compensation for damages and medical expenses. Fortunately, the healthcare professional had liability insurance tailored to their field, ensuring coverage for legal costs and potential settlements.

Case Study 3: Product Liability Protection

A manufacturer of consumer electronics faced a product liability claim when a faulty product caused property damage and injuries to customers. Due to their extensive product liability insurance, the manufacturer effectively handled claims and reduced the financial impact. Adequate coverage prevented major financial losses and protected the company’s reputation.

Case Study 4: Professional Indemnity Insurance

In this scenario, an architect was sued by a client who alleged negligence and errors in the design of a commercial building. The architect had professional indemnity insurance, which covered legal expenses and potential compensation. This insurance played a crucial role in protecting the architect’s professional reputation and financial stability.

Case Study 5: General Liability Coverage for Personal Injury

A retail store faced a lawsuit when a customer slipped and fell on a wet floor, resulting in significant injuries. The store’s general liability insurance coverage played a vital role in covering the customer’s medical expenses, legal costs, and any potential settlement. Without this coverage, the store owner could have been held personally liable for the damages.

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The Final Word on Liability Auto Insurance 

The majority of states will require drivers to carry at least some amount of liability insurance in order to drive legally. If your state only requires a low limit of liability insurance coverage, we recommend carrying more to avoid having to pay out of pocket and help with legal costs if you are sued. 

If you are concerned about the cost of liability auto insurance, you should shop around and get quotes from a few companies. You can use our free quote comparison tool to find the cheapest auto insurance rate from companies in your area.

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