What Is Liability Car Insurance, And Do I Need It?

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Liability car insurance protects you financially if you’re held responsible for an accident that injures others and/or causes damage to another driver’s vehicle. Every state except New Hampshire requires a minimum amount of liability coverage, and these amounts vary. However, such policies rarely provide enough coverage if you’re found at fault for causing a major accident.

According to CarInsurance.com, the average annual cost for a state-minimum liability car insurance policy is $503 per year or $42 monthly.

What does liability insurance cover?

In the event of an at-fault accident, a liability auto insurance policy offers you two kinds of protection:

• Bodily injury liability insurance covers another driver’s medical expenses if they get hurt. This can range from an ambulance ride and emergency surgery to rehabilitation care and lost wages.
• Property damage liability insurance covers physical damage you may cause, whether to another driver’s vehicle, a neighbor’s fence, or a city street lamp.

Liability insurance contains coverage limits, the maximum amount your insurer will pay in the event of a claim. These limits are expressed as a series of numbers, such as 50/100/50, and are broken down this way:

• Bodily injury liability per person: The maximum coverage for one person’s injuries in an accident; in this case, $50,000.
• Bodily injury liability per accident: The total reimbursement for all injuries in a single accident, or $100,000 in this example.
• Property damage liability: The total amount for all property damage claims in a single accident, or $50,000 for this case.

Experts recommend purchasing higher liability coverage limits than what is legally required. For example, suppose your state requires liability coverage limits of 25/50/25. In that case, you might consider doubling your coverage limits to 50/100/50 or even 100/300/100 if you can afford it due to the ever-increasing cost of vehicle repairs and medical care.

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Choosing high-liability insurance may sound expensive, but it might be cheaper than you think, says Sev Tamayo, an agency owner at Goosehead Insurance in Palm Coast, Florida.

“Increasing your liability coverage limits from the state minimum to the maximum amount might only cost an additional $20 to $30 monthly,” he says. “While the exact cost will depend on your driving history and other factors, you may be surprised by how affordable comprehensive liability coverage can be.”

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Do I need anything besides liability car insurance?

If you want insurance for your vehicle, you’ll need full coverage car insurance. This kind of insurance includes both liability insurance and comprehensive and collision insurance.

• Collision insurance does just what the name implies, provide financial protection to your vehicle if it is damaged or totaled in a collision with another vehicle where you are at fault. It also applies if you hit a stationary object like a building, road sign or mailbox and your car is damaged.
• Comprehensive insurance applies to non-collision events that damage or destroy your automobile. These can include theft, vandalism, wildfires, tornadoes and hurricanes, hail, and even striking an animal while driving.

Comprehensive and collision insurance come with a deductible, which is the money you must pay before your insurer steps in. Deductibles can range from zero out-of-pocket to $1,000 or more, and you usually can adjust your deductible up or down to suit your finances. The greater your deductible, the less your premium will be, but make sure that the deductible amount is one you can afford to pay in case of a claim.

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Other insurance coverages you may want to purchase include:

• Gap insurance is often required by your lender if you have financed or leased your vehicle. This kicks in if your car is totaled or stolen and you owe more on your lease or loan than your car’s fair market value – the amount that your insurer will reimburse your lender. Gap insurance bridges this financial shortfall so you don’t have to pay it yourself. It does not have a deductible.
• Uninsured/underinsured motorist insurance provides coverage if you’re hit by a driver who either lacks insurance or whose insurance is insufficient to pay for your medical bills and vehicle repairs. Depending on state law where you live, this coverage may or may not have a deductible. Coverage levels can be as low at $5,000 or as high as $500,000 or more.
• Medical payments (MedPay) is another coverage required in a handful of states. It covers medical expenses for you and your passengers, regardless of who is at fault in an accident and can supplement your health insurance. There is no MedPay deductible. Coverage levels are low, usually $10,000 or less.
• Personal injury protection (PIP) is required in states with at-fault car insurance laws. If you’re injured in an accident, regardless of who is at fault, you must file a claim with your PIP insurance in these states. As with comprehensive and collision coverage, PIP insurance contains a deductible, typically $500 or $1,000, but may be higher or lower depending on your carrier. As with other types of insurance, you can adjust your PIP deductible. Coverage levels vary by state but can range from $50,000 or less to $250,000 or more.

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