Liability Car Insurance: What It Covers and How It Works

Liability car insurance is coverage that pays to repair the damage you cause with your vehicle to other people and their things. Liability just means “responsibility,” so liability insurance pays out when you’re responsible for an accident.

There are two types of liability car insurance — bodily injury liability coverage and property damage liability coverage — and most states require you to have both. Here’s the difference between the two and how much liability auto insurance you need.


What does liability car insurance cover?

Liability insurance is the part of your auto policy that pays for expenses when you cause an accident. It has two main components:


Body injury liability coverage

This coverage pays out if you injure other people in a car accident that's your fault. Bodily injury liability coverage, or BI, typically covers things like medical expenses, recovery treatments and lost wages if someone can't work while they're recovering. It could also cover funeral costs after a fatal accident.


Property damage liability coverage

This coverage, sometimes abbreviated PD, pays for damage you cause to vehicles or other property when you're at fault for an accident. For example, it could pay to repair the other driver’s car or to replace a fence you crashed into.

Property damage liability coverage can also include the things in a person's vehicle.

Say you get in a little fender bender, and the other driver had $4,000 worth of crystal in the trunk that is now sparkly rubble. Your property damage liability insurance will cover the crystal replacement — and the new bumper.

Beyond injury and property damage, liability car insurance can also cover lawyers' bills or court fees if you're sued after an accident.


Liability car insurance limits

Liability auto coverage will pay only up to the maximum amounts, or limits, specified in your policy. If damage from an accident exceeds those limits, you'll have to pay the rest yourself.


Split limit liability

Most auto policies have three main liability limits, which are often summarized by three numbers. For example, you may see something like “30/60/15” as your state’s required minimum coverage. Here's how to interpret that.

Body injury liability limit per person. The first number is the maximum your insurance will pay for injuries to a single person after an accident. (In the example above, “30” stands for $30,000.)

Bodily injury liability limit per accident. The second number is the maximum for injuries to everyone you hurt in the accident — not including your own injuries. The per-accident maximum comes into play if there are multiple people injured in an accident. (This is the “60” above, meaning $60,000.)

Property damage liability limit per accident. The final number represents the maximum amount your insurance company will pay for property damage you cause. That includes damage to cars, buildings or anything else that isn't a person. (“15” above means $15,000.)

One distinction: While bodily injury liability has a per-person limit, property damage liability has only a per-accident limit. If you hit three cars, the total your insurance will pay is represented by that final number ($15,000 in this example), and you'll be responsible for the rest.


Split limit liability example

Imagine you cause an accident that injured three people, and their medical bills are $10,000 per person. Your 30/60/15 liability car insurance would cover this because each person's injury cost is below the $30,000 per-person maximum, and collectively their injury costs are below the $60,000 policy maximum. However, if persons A and B each had $10,000 worth of injuries while person C had $35,000 worth of injuries, you might be required to pay $5,000 for person C. That's because — though their combined medical expenses are less than the policy limit of $60,000 — person C's medical bills exceed the $30,000 per-person policy limit.


Combined single limit liability

Some insurances offer an alternative to split limit auto liability coverage called combined single limit liability. Combined single limit liability is one larger liability limit to cover both bodily injury and property damage. In many cases, the flexibility of this type of liability insurance means more financial protection than split limit coverage.

For example, let's compare the split limit liability above (30/60/15) with a combined single limit of $60,000. Say you injured two people in an accident, and one required $10,000 worth of treatment while the other required $50,000. With split limit liability, you could end up paying $20,000 for the second person's injuries because the treatment exceeded your policy's per-person maximum of $30,000. But with a combined single limit of $60,000, all treatment would be covered.

Combined single limit liability coverage may cost more than split limit liability car insurance.


What liability auto insurance doesn't cover

Liability auto insurance won't pay for your own 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 rely on other types of insurance, such as health insurance for your medical expenses and collision insurance for repairs to your vehicle. If you want more protection, consider buying full coverage car insurance. Full coverage isn't a specific type of policy, but refers to a combination of coverage types including liability insurance and comprehensive and collision coverage.


Do you need liability car insurance?

In a word, yes: Almost all car insurance policies must include some liability coverage.

Every state except Alaska, New Hampshire and Virginia requires all drivers to have liability auto insurance. (Virginia waives the liability requirement if you pay the state $500 annually, and Alaska exempts some residents from its mandatory minimums.) Each state sets its own minimum car insurance requirements, and many require additional types of insurance. (See table below)

These requirements are in place to protect drivers who aren't at fault in a wreck. If you're in an accident and another driver is at fault, you should be able to get back up and running quickly. Liability car insurance makes this possible.


How much does liability insurance cost?

The average national cost of minimum car insurance, which typically includes liability auto insurance and other state-mandated coverage, is $561 per year, according to a recent NerdWallet rate analysis. This rate goes up to $862 per year, on average, if you have an at-fault accident on your record. For drivers who have a recent DUI or DWI, minimum coverage costs $1,134, on average.

Car insurance rates vary widely by state and are also derived by things like your age, your personal driving history, the make and model of car and, in some states, your credit score. To find the best auto policy for you, we recommend that you compare car insurance quotes.


How much liability insurance do you need?

You’re required to have only the amount of liability car insurance mandated by your state. However, you may want a higher limit to protect your savings and other financial assets should you cause an accident. Medical bills and car repairs can be incredibly expensive. A split second could be the difference between a normal day and the beginning of bankruptcy.

For example, say you hit another car, total it and seriously injure four people. If you're at fault, you'll be responsible for the value of the car, medical bills of all four passengers and any damage to the roadway. Now, you're looking at paying almost $500,000 in medical bills and another $50,000 for the car and damaged roadway. Can your liability auto insurance pay for them?

If you don't have enough coverage — that is, if your bodily injury and property damage limits aren't that high, respectively — you can be held personally responsible for any excess. The people you injured can sue you for that money, and you could end up losing your home or, in some states, having your wages garnished. The more you have to lose, the more they can come after.

As a general rule, you'll want enough liability insurance to cover your net worth. That's equal to the value of all the cash you have and the things you own, minus your debt.

If you don't have much stuff, there's less incentive to sue you, and you may not need any additional coverage. Maybe you'll decide the extra money in your pocket is worth more than the peace of mind from extra coverage.


Need more liability insurance? Grab an umbrella

Your car insurance company might not allow liability limits high enough to cover all your assets — many auto insurers have a maximum bodily injury limit of $500,000 or lower.

If you think you'll need more liability coverage than your auto insurance will provide, consider an umbrella insurance policy. Umbrella policies expand auto and home liability insurance beyond your carrier's normal limits.

In general, umbrella policies cover those who have a lot of assets or more opportunities to encounter risk. You might have the sort of risk an umbrella policy is meant to cover if you:

  • Host lots of parties.
  • Have a swimming pool, trampoline or other feature that could be considered an “attractive nuisance.”
  • Own one or more dogs. Depending on the breed of your dog, your insurance may not cover your animal.
  • Own rental properties.


Liability auto insurance if you don't own a car

If you don't own a vehicle but sometimes drive someone else's, you may want to buy liability coverage in the form of non-owner car insurance. This type of policy pays out if you’re found responsible for injuries or property damage while driving someone else’s car.

Non-owner insurance is auto liability coverage only, and is appropriate only if the cars you typically borrow (or rent) belong to someone outside your household. Otherwise, you should be added to your household member's auto policy. (If an insurance company finds out you live with a customer, the insurer may have already added you.)