Liability Car Insurance: Cost And Coverage

Shawn Plummer

CEO, The Annuity Expert

Have you considered getting liability car insurance for your vehicle but don’t know where to start? Don’t worry- this guide will answer all your questions about the specifics of liability car insurance. In addition, we’ll look at what it covers and why it’s essential so you can make an informed decision regarding protecting your finances with such an essential form of coverage.

What Is Liability Coverage in Auto Insurance?

Liability coverage in auto insurance refers to the portion of your policy that provides financial protection if you cause an accident and are legally responsible for any resulting injuries or property damage. It helps cover the costs of bodily injury and property damage to others involved in the accident.

Liability Car Insurance

How Does Liability Car Insurance Work?

Liability coverage in auto insurance provides financial protection to the policyholder if they are found legally responsible for causing an accident that resulted in injuries or property damage to others. Here’s how it generally works:

  • Accidents and Liability Determination: If you’re involved in an accident, the insurance companies of the parties involved will investigate to determine who is at fault. This determination is based on eyewitness accounts, police reports, and other available evidence.
  • Reporting the Accident: You should promptly report the accident to your insurance company. They will guide you through the claims process and help you understand your coverage.
  • Coverage Limits: Your liability coverage has predetermined limits you selected when purchasing your policy. These limits represent the maximum amount your insurance company will pay for each accident. For example, if your coverage limits are $50,000/$100,000/$50,000, your insurer will pay up to $50,000 for each injured person, up to a maximum of $100,000 per accident, and up to $50,000 for property damage.
  • Bodily Injury Liability: If you are found at fault for causing bodily injuries to others in the accident, your liability coverage will help cover the injured parties’ medical expenses, rehabilitation costs, pain and suffering, lost wages, and other damages up to your policy’s limits.
  • Property Damage Liability: If you are responsible for damaging someone else’s vehicle or other property in the accident, your liability coverage will help cover that property’s repair or replacement costs up to your policy’s limits.
  • Legal Defense: If the injured parties sue you for damages beyond the coverage limits of your liability policy, your insurance company will typically provide legal defense and representation.
  • Out-of-Pocket Expenses: It’s important to note that liability coverage has limits, and if the damages exceed your coverage limits, you may be personally responsible for the remaining costs. That’s why it’s recommended to consider higher coverage limits if your budget allows.
  • Premiums and Deductibles: Liability coverage is a standard component of auto insurance policies, and the premiums you pay are based on various factors, such as your driving record, location, and coverage limits. Additionally, liability coverage usually does not have a deductible. However, other coverages in your policy, like collision or comprehensive coverage, may have deductibles.

What Does Liability Car Insurance Cover?

Car liability insurance covers the damages and injuries you may cause to others in an accident for which you are deemed at fault. It typically includes two primary types of coverage:

  • Bodily Injury Liability: This coverage helps pay for the medical expenses, hospital bills, rehabilitation costs, pain and suffering, and lost wages of the other parties involved in an accident you caused. It applies to injuries suffered by pedestrians, passengers in other vehicles, and drivers or passengers in the vehicles you hit.
  • Property Damage Liability: This coverage helps cover the repair or replacement costs of the other party’s property, such as their vehicle, fence, or other damaged property resulting from the accident. It may also cover damages to structures, such as buildings or lampposts if they are hit during the accident.

Liability car insurance is mandatory in most states, as it ensures you can compensate others for their losses if you cause an accident. In addition, it helps protect you from such incidents’ potential lawsuits and financial burdens.

What Doesn’t Liability Car Insurance Cover?

While liability car insurance covers damages and injuries you may cause to others in an accident, certain situations and types of losses are typically not covered by liability car insurance. Here are some standard exclusions:

  • Damage to Your Own Vehicle: Liability car insurance does not cover repairs or replacement costs for your vehicle if it is damaged in an accident where you are at fault. You would need additional collision or comprehensive insurance coverage to cover your vehicle.
  • Personal Injuries: Liability car insurance generally does not cover medical expenses, lost wages, or other personal injury-related costs for you or your passengers. It is designed to cover injuries and damages suffered by others.
  • Uninsured or Underinsured Motorists: Liability car insurance does not typically cover damages or injuries caused by uninsured or underinsured motorists. You may need uninsured/underinsured motorist coverage to protect yourself.
  • Intentional Acts: Liability car insurance does not cover intentional acts or intentional damage caused by the policyholder. It is designed to protect against accidental or negligent actions.
  • Damage to Property in Your Care: Liability car insurance generally does not cover damages to property in your care, custody, or control. This includes rental vehicles or other property that you are responsible for.
  • Racing or Off-Road Use: Liability car insurance usually excludes coverage for accidents that occur while racing or using the vehicle off-road. Separate coverage may be required for such activities.
  • Business Use: If you use your car for business purposes, liability car insurance may not cover accidents or damages during business-related activities. Commercial auto insurance may be necessary for proper coverage.

How much cheaper is liability-only coverage?

The cost difference between liability-only coverage and full coverage (including comprehensive and collision coverage) can vary depending on your location, driving history, vehicle type, and the insurance provider you choose. Generally, liability-only coverage tends to be significantly cheaper than full coverage.

  • Liability-only coverage: This focuses solely on covering damages and injuries you may cause to others in an accident for which you are at fault. It does not provide coverage for your vehicle or injuries. This limited coverage reduces the insurance company’s risk, resulting in lower premiums than full coverage.
  • Full coverage: This, on the other hand, includes liability coverage and comprehensive and collision coverage. Comprehensive coverage protects against theft, vandalism, natural disasters, and other non-collision-related damages to your vehicle. Collision coverage helps cover your vehicle’s repair or replacement costs in an accident, regardless of fault.

Since full coverage provides broader protection for your vehicle, it typically carries higher premiums than liability-only coverage. The cost difference can vary, but liability-only coverage may be significantly cheaper, sometimes by several hundred dollars or more annually.

Does liability insurance cover my car if someone hits me?

No, liability insurance coverage does not cover the damages to your car if someone else hits you. Auto liability insurance is designed to cover the damages and injuries you may cause to others in an accident for which you are at fault.

When someone else hits your car, their liability insurance (if they have it) should cover the damages to your vehicle. This is typically covered under their property damage liability coverage. However, if the at-fault driver does not have insurance or is underinsured, you may need to rely on your insurance coverage to cover the damages.

Bodily Injury Liability Coverage

How Much Does Liability Insurance Cost?

The cost of liability car insurance can vary depending on several factors. Here are some key factors that can influence the cost of liability car insurance:

  • Coverage Limits: The coverage limits you choose for your liability insurance can impact the cost. Higher coverage limits will typically result in higher premiums.
  • State Requirements: Each state has different minimum liability insurance requirements. The mandated minimum coverage limits can influence your state’s liability insurance cost.
  • Driving Record: Your driving history, including past accidents, violations, and claims, can affect the cost of your liability car insurance. You may qualify for lower premiums if you have a clean driving record.
  • Age and Gender: Younger, less experienced drivers may face higher premiums than older, more experienced drivers. Additionally, statistically, males tend to have higher insurance rates than females.
  • Location: The area where you live can impact the cost of insurance. Urban areas with higher population densities or higher rates of accidents may have higher premiums.
  • Vehicle Type: The type of vehicle you drive can affect your liability insurance rates. Factors such as the car’s make, model, age, and safety features can be considered in determining the premium.
  • Insurance Provider: Insurance companies may have different pricing structures and algorithms for determining premiums. It’s advisable to obtain quotes from multiple insurance providers to compare costs.

Why is liability-only car insurance so much cheaper?

Liability-only car insurance is typically much cheaper than full coverage insurance due to the difference in coverage provided. Here are some key reasons why liability-only car insurance tends to have lower premiums:

  • Limited Coverage: Liability-only insurance covers damages and injuries you may cause to others in an accident for which you are at fault. It does not cover damages to your vehicle. Since the coverage is limited to liability, the insurance company’s risk exposure is lower than full coverage insurance.
  • Exclusions: Liability-only insurance excludes coverage for your vehicle, which eliminates the need for the insurance company to account for potential repair or replacement costs. This narrower scope of coverage reduces the insurer’s potential financial liability, leading to lower premiums.
  • Lower Claim Costs: Liability insurance primarily covers injuries and damages others suffer. Compared to comprehensive and collision claims, liability claims typically have lower average costs for the insurance company. This contributes to lower premiums for liability-only coverage.
  • Frequency of Claims: Liability claims are generally less frequent than claims for damages to your vehicle. Since liability insurance focuses on covering damages to others, which may not occur as frequently as damage to your vehicle, the overall risk and probability of claims are reduced.
  • Market Competition: Insurance companies often compete for customers by offering competitive rates for liability-only coverage. This competition can help reduce premiums and make liability-only insurance more affordable than full coverage.

How much liability car insurance do you need?

The amount of liability car insurance you need depends on several factors, including your circumstances, the value of your assets, your state’s minimum requirements, and even potential social security implications. It’s generally recommended to consider adequate coverage to protect your assets and provide financial security in an accident. Here are some considerations to help determine the appropriate amount of liability car insurance:

  • State Requirements: First, familiarize yourself with your state’s minimum liability insurance requirements. Each state sets minimum coverage limits for bodily injury and property damage liability. You must at least meet these minimum requirements, although it may be advisable to consider higher limits for better protection.
  • Asset Protection: Consider the value of your assets, including savings, property, and investments. Liability insurance protects your assets by covering the damages you may cause to others. If the value of your assets exceeds the state’s minimum coverage requirements, it’s generally recommended to consider higher liability limits to protect your assets in case of a lawsuit adequately.
  • Risk Assessment: Assess your personal risk factors, such as your driving history, the frequency of driving, and the driving you typically engage in. If you drive frequently or have a history of accidents, you may want to consider higher liability limits to mitigate potential risks.
  • Personal Comfort: Consider your comfort level with assuming financial responsibility beyond insurance coverage. If you prefer higher financial protection and peace of mind, opting for higher liability limits may be wise.
  • Umbrella Insurance: Besides liability car insurance, you might consider umbrella insurance. An umbrella policy provides additional liability coverage that goes beyond the limits of your auto insurance policy. As a result, it can offer broader protection and higher liability limits, ensuring you have adequate coverage across all areas of your life.

What happens if I don’t have enough liability insurance for a car accident?

You may be personally responsible for the remaining costs if you don’t have enough liability insurance to cover the damages resulting from a car accident. Here’s what can happen if your liability insurance falls short:

  • Out-of-Pocket Expenses: If the damages exceed the limits of your liability insurance, you may have to pay the additional costs out of your pocket. This can include medical expenses, property damage, and other losses suffered by the affected parties.
  • Lawsuits and Legal Action: If you don’t have sufficient insurance coverage to compensate the injured parties, they may choose to file a lawsuit against you to seek additional compensation. If found liable, this can result in legal expenses, court fees, and potentially substantial judgments against you.
  • Damage to Personal Finances: If you cannot pay the remaining costs and a judgment is entered against you, it can have severe financial consequences. Your wages may be garnished, your assets may be seized, and your credit score may be negatively impacted.
  • License Suspension or Revocation: Some jurisdictions have laws that allow for the suspension or revocation of your driver’s license if you fail to maintain the required liability insurance. This can restrict your ability to drive legally and may result in additional penalties and fees to reinstate your license.

Next Steps

All in all, liability auto insurance protects your finances in an automobile incident. It ensures that you won’t face overwhelming costs for someone else’s misfortune, and it also provides a financial safety net for those who might be responsible in the case of an accident. We hope this guide has provided insightful information about liability car insurance and made deciding whether or not to purchase it more straightforward. Don’t expose yourself to expensive auto-related costs without considering this form of financial protection. If you’re interested in learning more or would like to request a free quote, don’t hesitate to contact one of our expert staff members today; we’d love to help answer your remaining questions and get you on the road to optimal protection.

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Frequently Asked Questions

How does liability car insurance help cover medical bills in the event of an accident?

Liability car insurance helps cover medical bills in an accident by providing financial assistance for the medical expenses of the other party involved if you are at fault.

What is liability car insurance, and how does it differ from other types of coverage car insurance?

Liability car insurance covers damages and injuries you may cause to others in an accident, while other types of coverage car insurance, like comprehensive and collision, protect your vehicle.

Does liability mean full coverage?

Liability coverage pays for injuries and damages caused to others if you are responsible. When we say “full coverage,” it usually includes liability coverage, state-mandated coverage, and comprehensive and collision coverage, which pays for car damages. Please note that “full coverage” is not an official insurance term.

How much liability insurance should I have?

Auto insurance experts suggest getting liability coverage of 100/300/100. This means having $100,000 in bodily injury liability insurance per individual, $300,000 in bodily injury liability coverage per accident, and $100,000 in property damage liability coverage per accident.

What makes a car a liability?

Do people consider a car a liability due to its maintenance costs? Car ownership necessitates expenditure for gas, frequent oil changes, maintenance, repair, insurance expenses, and repair costs for breakdowns.

What does full coverage mean?

Your lender may require you to have “full coverage” when financing or leasing a vehicle. This means you need comprehensive collision coverage and any other coverage required by your state. Liability coverage is mandatory in almost every state, while comprehensive and collision coverage are optional and considered physical damage coverages.

What does liability insurance involve?

Liability insurance covers claims arising from injuries or harm to people or property. This insurance can be used to pay for legal expenses and damages for which the insured individual or business is deemed responsible. However, liability insurance does not cover intentional damage, contractual liabilities, and criminal prosecution.

What does liability insurance cover vs. full coverage?

Liability coverage is designed to protect others if you cause harm or damage. “Full coverage” typically includes mandatory liability coverage, optional collision, and comprehensive coverage for your vehicle, but it is not a standalone insurance policy.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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