What is liability car insurance?

What does liability car insurance cover?

Liability car insurance has two main components:

1. Bodily injury coverage
2. Property damage coverage

Insurance companies often assign separate and different limits for these coverages. But some offer combined limits for more flexibility.

Rob Bhatt, an insurance expert at LendingTree, explains that bodily injury liability covers other people’s medical treatment when they’re injured in an accident that you cause. “It can also cover their physical therapy and lost wages if their injuries require them to miss time from work. If the injuries are severe, it can also cover the victim’s ‘pain and suffering,’” he said.

Property damage liability comes in when you damage someone else’s property in an accident. This coverage pays for repairs to other drivers’ vehicles and fixes damage to structures such as light posts, fences and garage doors.

Riley Beam, a personal injury attorney at Douglas R. Beam in Melbourne, Florida, notes that some exclusions in liability coverage apply:

• Accidents that occur while driving under the influence
• Commercial activities such as food delivery without proper endorsements
• Damage to your vehicle
• Intentional damage or criminal activities
• Your injuries from the accident

Certain states may have unique limitations, though. For instance, Beam points out that Florida is a no-fault state. This means Personal Injury Protection (PIP) covers the driver’s lost wages and medical expenses post-accident — no matter who was at fault.

» LEARN: How does car insurance work?

Liability coverage in action

Suppose you slide on ice through a red light, hitting another car. Your liability coverage would pay for the other driver’s medical bills, their lost wages while recovering and repairs to their car. But to fix your car, you’d either need to pay out of pocket or have collision coverage.

Why is liability car insurance required?

States mandate liability car insurance to protect everyone on the road from dire financial losses after accidents. This insurance ensures that if someone causes a crash, they have the means to compensate victims for injuries and property damage.

Unless you live in New Hampshire, you must carry liability insurance in 2025. And even in the Granite State, you have to prove you can pay if you cause a wreck. While Virginia previously allowed drivers to pay a fee to drive uninsured, this practice ended in 2024.

Minimum coverage requirements vary by state. For example, some states require as little as $15,000 in bodily injury coverage per person, while others mandate $50,000 or more. Many states also require other coverages, such as uninsured motorist protection or personal injury protection.

In most states, driving without proof of financial responsibility is a finable offense. You may face one or more of the following consequences if you drive without proper coverage:

• Driver’s license suspension
• Heavy fines and penalties
• Personal liability for all accident costs
• Possible jail time in some states
• Vehicle registration suspension

Liability vs. full coverage auto insurance

The main difference between liability and full coverage lies in what’s protected. But Bhatt notes that full coverage isn’t a technical insurance term. Many associate full coverage with a policy that includes liability, collision and comprehensive coverage.

While liability only covers damage you cause to others, collision pays for repairs to your car after an accident. Comprehensive handles non-accident damage such as theft, vandalism and weather damage. Beam suggests getting full coverage if you can’t afford to replace your car out of pocket.

Understanding insurance costs can help with this decision. Liability and collision coverage make up the bulk of your insurance costs, while comprehensive protection adds a minor increase.

For example, “if you’re paying $600 a year for a liability-only policy, adding collision will nearly double the cost to about $1,100,” Bhatt explained. “Adding comprehensive, in addition to collision, will bump it up to about $1,200.”

Consider upgrading to full coverage if you:

• Have a new or valuable vehicle
• Are financing or leasing your car
• Live somewhere prone to extreme weather or theft
• Can’t afford to repair or replace your car out of pocket

» MORE: 8 types of car insurance coverage

Pro tip

Insurance costs vary based on various factors such as your location, driving record and vehicle type. Contact your insurance provider for the most accurate quote based on your circumstances.

How to choose the right liability coverage limits

When selecting liability coverage limits, many drivers make the mistake of choosing their state’s minimum requirements. But “the minimum liability limits in each state haven’t kept up with inflation. Several states have the same liability requirements they had in the 1990s or earlier when medical costs and car repairs were a lot lower than they are today,” said Bhatt.

Choosing state minimum coverage might save you money on premiums. But a big accident could wipe you out if your insurance doesn’t cover it all. For instance, Beam points out that in Florida, the $10,000 minimum property damage requirement won’t cover totaling a new car.

This gap in coverage can have catastrophic repercussions. “If you cause an accident that results in serious injuries, you could be on the hook for a six-figure settlement or more,” Bhatt emphasized. Without adequate coverage, you could face savings depletion, property liens or wage garnishment.

Several circumstances may signal the need for higher coverage limits:

• You have a high annual income or net worth
• You have many valuable assets
• You have retirement savings to protect
• You live in an area with expensive vehicles
• You own a property (or several)

Not sure if you should raise your coverage limits?

“Think about how much stuff you own,” Beam advised. The more you have to lose, the more coverage you may want to get. Consult your insurance agent for a personalized assessment of your coverage needs based on your assets and risk factors.