Liability Coverage

Liability coverage

Most states require drivers to buy liability insurance before hitting the road.

When drivers talk about auto insurance, they’re usually referring to liability coverage. This is the insurance that covers you if you’re at fault in an accident and you need to pay for the resulting costs.

What does “at fault” mean? Being at fault means you’ve caused an accident. In most states, being at fault means your insurer will pay for car repairs, medical bills and other costs that result from the incident.

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What is liability coverage?

While you’re driving, there’s always a risk that you’ll be at fault for an accident. Maybe you’ll hit another car, injure another person or damage someone’s property. Of course, you’ll need to pay for the resulting costs — whether those include car repairs, medical expenses or replacing damaged property.

Those costs can increase rapidly. To avoid paying these costs out of your own pocket, you buy liability coverage to protect yourself. Liability coverage will pay for most or all of your costs should you be on the hook for any damages.

Types of liability coverage

There are two types of liability coverage: bodily injury liability and property damage liability.

  • Bodily injury liability pays for costs if you’ve injured another person in a car accident.
  • Property damage liability pays for costs if you’ve damaged another person’s property in a car accident.

Does it come with a deductible?

Liability coverage usually doesn’t come with a deductible. For example, if you hit someone else’s car and your insurance covers the cost of repairs, you won’t have to pay out of your pocket.

What is a deductible?

The deductible is what you’ll pay before your insurance company will pay a claim.

Let’s say you file a claim to your insurance company for a $5,000 car repair bill. Your insurance covers you for that amount, but it includes a $500 deductible. This means you must pay $500 out of your own pocket before your insurance will cover the other $4,500.

Understanding how liability coverage works

When you’re buying car insurance, you’ll need to choose the amount of liability coverage you want. Your policy will either be split limit or combined single limit.

Split limit policy

While shopping for liability coverage, you may see an insurance policy express as “25/50/15.” When you see numbers expressed in this way, you’re looking at a split limit policy.

These numbers are just shorthand for how much your insurance will cover you for:

  • The first number is the individual payment limit per accident for bodily injury. The “25” in our example refers to $25,000. It’s how much your insurance will cover for each person’s bodily injury costs (other than yours). For example, if you’ve injured someone in an accident and their medical bills are $20,000, you’re covered.
  • The second number is the overall payment limit per accident for bodily injury. The “50” refers to $50,000. It’s how much your insurance will cover for the total bodily injury costs in an accident (other than yours). For example, if you’ve injured five people and their medical bills are $20,000 each, you’re on the hook for $100,000. In this case, your policy will cover $50,000, and you’ll need to pay the other $50,000 yourself.
  • The third number is the overall payment limit per accident for property damage. The “15” refers to $15,000. It’s how much your insurance will cover for the total cost of property damage in an accident. (This doesn’t include your own vehicle — instead, you’ll need collision coverage for that.) For example, if you rammed into a barn and it costs $6,000 to repair it, your insurance will cover the expenses.

The three numbers will change to create different policies. Your state will most likely have policy minimums, but otherwise you’re free to choose the right mix for your own needs.

Combined single limit policy

A combined single limit policy offers one coverage limit.

Let’s say you took out $200,000 of combined single limit coverage. In the event of an accident, you can split this coverage between different types of damages. For example, you’d be covered in these instances:

  • One person’s medical bills totals $150,000, and there’s $30,000 in property damage.
  • The medical bills of four people total $200,000.
  • You caused property damage that costs $180,000. You also need to pay for someone’s medical bill of $15,000.

All of those costs are $200,000 or less, so your insurance will cover them.

Why should I buy liability coverage?

Unless you live in New Hampshire or Virginia, you’re required by law to have liability coverage. That said, the more important question is how much you want to buy.

Though you’ll be ready to drive if you meet your state’s coverage requirements, you may want to buy a higher amount of coverage. The average claim for bodily injury is around $15,000 per person, and the average claim for property damage is around $3,000.

Even still, both types of costs can increase quickly — especially in accidents that involve multiple vehicles. As a rule of thumb, many experts recommend buying policies that at least cover the value of your assets.

What are the requirements for New Hampshire and Virginia?

If you live in New Hampshire, you’re not required to have auto insurance. However, you need to prove you can pay if you cause bodily injury or property damage. The easiest way to do this, of course, is by purchasing insurance.

It’s not mandatory to have auto insurance in Virginia, either. But like in New Hampshire, you must prove that you can pay for costs stemming from bodily injury or property damage. You can do that by either buying insurance or paying a fee to Virginia’s DMV.

How much does liability coverage cost?

The overall cost of liability coverage will vary considerably depending on your age, where you live and your driving history, among other factors. As a ballpark, expect it to cost between $1,000 and $2,000 a year.

How do I buy liability coverage?

It’s a standard insurance policy, so nearly all insurers offer liability coverage. Use our insurance comparison tool to shop around at different providers.

Bottom line

In all states but Virginia and New Hampshire, liability coverage is required for every driver. Your state will likely have coverage minimums, but consider purchasing higher coverage limits to protect your assets.

Find the cheapest rates

Use our magical comparison tool to find providers with the cheapest rates in your area. Enter your zip code below and click ‘Compare’.

Frequently asked questions

The best way is to check with your state’s Department of Motor Vehicles. Most likely, your state requires all drivers to carry liability coverage for bodily injury and property damage. (The exceptions are New Hampshire and Virginia, which have different rules.) Your state may also require you to buy personal injury protection or medical payments coverage.

Insurance companies want to make a profit. They want to make sure you’re paying them more than they’re potentially paying out on your behalf. To do that, they’ll assess how risky you are to insure.

Many factors go into determining your insurance premium. These include your age, your gender, your driving history, the car you drive and more. For example, teenagers tend to get into more accidents than drivers ages 25 or older, and some cars are safer to drive than others.

Shop around and get quotes from multiple insurers. With so many providers on the market, you’ll quickly find an attractive price. Make the search easier by using our car insurance comparison tool to compare multiple providers in your state at once.

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