It’s an unfortunate fact of life that humans are subject to failure. No matter how great we think our skills are, everyone and their mother comes up short from time to time. That’s especially true when us meatbags are plopped behind the wheel of a 4,000-pound vehicle and told to mingle with other failure-prone individuals.
Accidents, then, are a fact of life — at least until we can figure out vehicle autonomy, and that ain’t happening any time soon, if ever. In the interim, auto insurance mitigates out-of-pocket expenses when those certainties arise. More specifically, liability insurance covers your hindquarters when you — yes, you, the person behind the wheel of that lifted bro-dozer — attempt to beat a yellow light and end up clipping a Toyota Sienna.
Insurance distinctions tend to be a nightmare for the general public to understand. As in the process of buying a car, there are endless decisions about expensive and more expensive add-ons, and they all seem designed to confuse the buyer. Terms are complicated and dense, and an insurance plan can appear as a jumble of numbers and legal mumbo jumbo that’s beyond the realm of understanding.
Thankfully, you have your friends at The Drive to explain what liability is in simple terms, how it differs from regular auto insurance, what it covers, how much you need, and how much it costs. Let’s get to it.
What Is Liability Insurance and What Does It Cover?
According to State Farm, one of the nation’s largest insurance providers, “Liability car insurance (or liability coverage, as it’s also known) helps pay for the costs of the other driver’s property and medical injuries if you are ‘at fault’ in an accident. Your insurer will pay for the property damage and injuries up to the covered limit.”
What that means is liability insurance pays the other party when you, the insured driver, are deemed at fault for property damage and bodily injury sustained in the accident.
Geico, another leading insurance provider, breaks the two down further, stating, “Bodily injury coverage provides payment for others injured in an accident.” This includes:
- Medical bills
- Lost wages
- Pain and suffering
The insurance company also specifies: “States may have different requirements on who can file a bodily injury claim against you.”
Property damage, however, is different. “Property damage coverage pays for damage to another person’s property,” Geico explains. “This could include damage to vehicles, a yard, light pole, or other property damaged because of the accident.” Included here is:
- A rental vehicle
- Diminished value of the vehicle after having been repaired
What’s Not Covered by Liability Insurance?
Essentially, you. Liability insurance only covers the damage you cause to someone else’s property or body. If you’re injured or your property or vehicle is damaged or destroyed, liability insurance will not cover those costs.
Those costs can be covered in other parts of your automotive insurance, though, if you choose to pay for those plans.
Do I Need Liability Insurance?
Most states require some form of liability insurance, but not all. However, in the event of an at-fault accident, liability insurance shields you from paying off damages and medical bills out of pocket.
As the United States’ medical bills are among the highest in the world and can quickly bankrupt you, we highly recommend you have liability insurance built into your auto insurance.
How Much Liability Coverage Do I Need and How Much Does It Cost?
That’s the million-dollar question, isn’t it? Liability coverage is really a bet against your own driving skills, something no one likes to do. Most insurance companies such as Geico, State Farm, and Farmers offer coverage calculators that help you determine the right amount of liability and auto insurance for your specific situation.
There’s no one answer as to how much liability insurance costs. Each person will have a different cost, which is affected by driving history, age, vehicle type, vehicle color, locale, coverage requirements, and plans. The calculators linked above can also help you determine how much your individual liability coverage will cost you per month, per six months, or per year, depending on how you pay for your insurance.
Are There Limits to Liability Insurance?
You’ll first need to ensure that your insurance meets your state’s minimum requirements.
There are limits, but those will depend on your specific coverage. Most of the time, liability insurance is broken down into three numbers such as 100/300/100. This means that you’d be insured up to $100,000 for medical injuries of each person involved, $300,000 for the total injuries of the accident, and $100,000 for property damage caused by the accident. Once you cross those thresholds, however, you will be legally responsible to pay whatever’s left.
State Farm explains: “If the damages you cause exceed the liability limits you have chosen, you could find yourself personally liable for all of the costs due that exceed the amount your insurance policy can pay. If you’re unable to pay those bills, it could result in garnished wages, liens against owned assets, and even court fees.”
Insurance provider Allstate provides an excellent answer to what liability insurance is, why you need it, and what it entails in the video below.
FAQs About Liability Insurance
You’ve got questions. The Drive has answers.
Q: Is liability insurance required in every state?
A: Not every state requires liability insurance. Geico has a great tool on its website that shows you the exact insurance needs for your particular state.
Q: What is liability-only insurance?
A: Liability-only insurance is when you only purchase liability insurance through a provider. It only covers the costs for repairs and medical bills for the other party when you’re deemed at fault. We don’t recommend that you purchase liability-only insurance.
Q: What is a “no fault” state?
A: According to Nationwide, “no-fault insurance, sometimes referred to as personal injury protection insurance (PIP), can help cover you and your passengers’ medical expenses and loss of income in the event of a covered accident, regardless of who is found at fault.” There are 18 states that require no-fault insurance, including Arkansas, Delaware, Florida, Hawaii, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Oregon, Pennsylvania, Texas, Utah, Washington.