Key takeaways
- In most states, if you only buy one type of insurance, it’s liability insurance.
- Liability insurance pays for damage you do to others, but doesn’t cover your damage or injuries.
- Liability-only insurance is the cheapest car insurance, but it also offers the least protection.
Liability car insurance pays for damage and injuries you cause to others while driving, up to your limits. It includes bodily injury liability, which pays for others’ medical bills and lost wages, and property damage liability, which pays for damage to someone else’s car or property. It doesn’t cover your own injuries or vehicle repairs in any situation.
In short, your liability insurance is really for other people. Most states require drivers to carry liability insurance so that the person responsible for any damage on the road can pay for it. Liability insurance typically doesn’t have a deductible, meaning you don’t have to pay anything out of pocket to activate it. However, if you’re found at fault for an accident with costs that are higher than your liability limits, you may have to pay whatever’s leftover.
What does liability car insurance cover?
Liability insurance includes two types of coverage — bodily injury liability (BI) and property damage liability (PD) — and they’re usually sold together. BI and PD pay for harm you cause to others on the road.
Bodily injury liability
Bodily injury liability pays for medical expenses if you cause an accident that injures someone else. For example, if you hit a pedestrian while they’re crossing the street, your BI pays for their hospital bills. If they sue over it, this coverage also helps pay your legal defense.
Property damage liability
Property damage liability pays for repairs if you’re deemed the at-fault driver in an accident that damages another person’s property. For example, if you veer into a metal median barrier and bounce off and hit another car, your PD pays to repair both the barrier and the other vehicle.
Non-liability coverages that are required in some states
Each state has its own car insurance requirements. Almost every state requires drivers to carry BI and PD, but some also require uninsured/underinsured motorist (UM/UIM), medical payments (MedPay) or personal injury protection (PIP).
- Uninsured/underinsured motorist coverage protects you if you’re hit by a driver who doesn’t have insurance or doesn’t have enough coverage to pay for your injuries or damage.
- Medical payments insurance covers your medical expenses after an accident, no matter who is at fault.
- Personal injury protection also pays for medical expenses, but goes further than MedPay. It can cover lost wages and essential services. PIP is also required in more states than MedPay.
Jerry insight“Minimum coverage” insurance refers to the combination of BI, PD, UM, MedPay and/or PIP that’s required by your state in the lowest limits you can legally buy. If your state requires other coverages, an insurer cannot sell you liability-only insurance.
What does liability car insurance not cover?
Your liability insurance doesn’t cover:
- Damage to your vehicle.
- Your injuries or those of your passengers.
- Damage to your car after an animal collision or weather event.
- Car theft or vandalism.
- Any of your belongings inside the car if damaged or stolen.
If an insured driver causes an accident that damages your vehicle or injures you, their liability insurance would pay your expenses, up to their limits.
Because liability insurance offers limited protection — even with add-ons like UM and MedPay — many drivers opt for full coverage car insurance policies. These policies include collision and comprehensive coverages, which pay for damage to your vehicle regardless of fault. Leased and financed vehicles require full coverage as part of the financing contract.
How liability limits work
Almost every state specifies a minimum amount of liability coverage that drivers must carry. These are often expressed in three numbers, such as 25/50/25, which translates to a policy that pays up to $25,000 in bodily injury per person, $50,000 in bodily injury per accident and $25,000 in property damage.
Financial experts often recommend extra liability insurance to protect your finances. Especially if you own assets like a home, significant savings or retirement accounts, higher liability limits are what protect those from being seized in a lawsuit.
Example: Say you have a 25/50/25 policy and cause an accident that totals a car worth $45,000. Your liability insurance would pay the first $25,000 of that policy, but you’d be on the hook for another $20,000.
How to choose the right liability limits
Liability coverage ultimately prevents you from losing assets like your retirement, home or car if you can’t pay for injuries or damage after an accident. Choosing limits that are higher than your net worth — the value of your assets minus debt owed — can help preserve your finances in the worst-case scenario.
Insurers may offer liability insurance up to $500,000 of BI and up to $250,000 of PD. If you want more than the maximum liability your insurer offers, consider an umbrella policy. Increasing your liability limits may raise your premium by a few dollars per month, whereas adding different coverage types like comprehensive or collision can add a larger sum to your payment.
For drivers with clean records who don’t have full coverage, a bodily injury policy that covers up to $25,000 per person and $50,000 per accident costs $190 per month on average, while a policy that covers up to $100,000 per person and $300,000 per accident costs $208per month, according to quotes for real Jerry customers. Be sure to shop around for rates from the best car insurance companies to get a good deal.
Methodology
Data included in this analysis comes from policies that Jerry has quoted within the last 18 months. Jerry services 48 states and offers a range of insurance companies to choose from.
Annie is a writer and editor at Jerry and has more than a decade of experience writing and editing digital content. Before joining Jerry, she was an assistant assigning editor at NerdWallet, where she covered loans. Previously, she worked at USAA and newspapers in Minnesota, North Dakota, California, and Texas. She holds a bachelor’s degree in journalism from the University of Minnesota.
Lacie Glover is a Lead Writer and Editor with sixteen years’ experience in the insurance category. Prior to Jerry, she spent more than a decade on NerdWallet’s content team writing, editing and then overseeing the auto insurance category, as well as dabbling in other insurance and automotive topics. Prior to her career in the online personal finance content space, Lacie spent time in the hard sciences, in clinical research and chemistry labs. She has a bachelor’s degree from Colorado State University.
