What Liability Car Insurance Covers and Why States Require It

Liability insurance pays for damage or injury you cause to someone else in a car accident

Liability car insurance covers the cost of injuries and property damage you're legally responsible for after an accident. If you hit another car, a person, or property, your liability coverage pays their medical bills, vehicle repairs, or other losses — up to the limits you chose when you bought the policy. It does not cover damage to your own vehicle or your own medical bills.

Every state except New Hampshire requires drivers to carry some amount of liability insurance before they can legally drive. The state sets a minimum amount you must carry, but you can buy more coverage than the minimum if you want it. If you cause an accident and don't have enough liability coverage, you become personally responsible for the rest of the bill.

Key Takeaways

• Liability insurance covers injuries and property damage you cause to others, not damage to your own vehicle.
• State minimum liability limits vary, but most states require at least $25,000 per person and $50,000 per accident for bodily injury, plus $25,000 for property damage.
• If you cause an accident and your liability limit is too low, you can be sued for the difference and may face wage garnishment or asset seizure.
• Liability coverage is mandatory in all states except New Hampshire, and lenders require it if you have a car loan or lease.

How liability limits work and what the numbers mean

Liability coverage comes with three separate limits written as three numbers, such as 25/50/25. The first number is the maximum paid for injury to one person. The second is the maximum paid for all injuries in one accident. The third is the maximum paid for property damage in one accident.

If you hit a car with three people in it and all three are injured, your first limit covers one person's medical bills up to that amount. Your second limit is the total for all three people combined. Once you hit either limit, your insurance stops paying and you owe the rest yourself.

State minimums are typically 25/50/25 or 15/30/5, meaning $25,000 per person and $50,000 per accident for injuries, plus $25,000 for property damage — or lower amounts in states with less stringent requirements. You can buy higher limits like 100/300/100 if you want more protection. Higher limits cost more per month but protect you if an accident is severe or involves multiple people.

What liability insurance does and does not cover

Liability insurance covers medical expenses, lost wages, pain and suffering, and vehicle repair costs for the other person or people involved in an accident you caused. It also covers legal fees if you're sued. The insurance company will defend you in court and pay the judgment up to your policy limit.

Liability does not cover your own injuries, your own vehicle damage, or damage to your property. It also does not cover accidents you cause while driving someone else's car (though their insurance may cover it), or damage caused by hitting an animal, weather, or theft. Those situations are covered by other types of insurance, such as collision, comprehensive, or medical payments coverage.

What happens if you cause an accident without enough liability coverage

If you cause an accident and your liability limit is lower than the total damage, the other person can sue you for the difference. A court can order you to pay from your personal assets — your bank account, paycheck, or home — through a process called a judgment lien. Some states allow wage garnishment, meaning money is taken directly from your paycheck until the debt is paid.

If you have a car loan or lease, your lender requires you to carry liability insurance as a condition of the loan. If your policy lapses or you cancel it, the lender may buy insurance on your behalf and add the cost to your monthly payment, usually at a higher rate than you would pay on your own.

Driving without liability insurance is illegal in every state except New Hampshire. If you're caught, you face fines, license suspension, and possibly jail time depending on the state. You may also be required to file an SR-22 form (a certificate of financial responsibility) with your state's DMV before you can drive again, which usually raises your insurance rates for three years.

State minimum liability limits vary

Most states require 25/50/25 or 15/30/5 as the minimum, but some states set different amounts. A few states have lower minimums like 10/20/5. You can look up your state's requirement on your state's Department of Motor Vehicles website or insurance commissioner's office website.

Even if your state's minimum is low, insurance companies and financial advisors often recommend carrying higher limits — typically 100/300/100 or more — because a single serious accident can easily exceed state minimums. Medical bills, lost income, and pain-and-suffering awards can reach hundreds of thousands of dollars, and you would owe anything above your policy limit out of pocket.

How liability insurance is priced

Your liability insurance rate depends on your age, driving record, location, the vehicle you drive, and how much coverage you buy. Younger drivers and those with accidents or traffic violations pay more. Urban areas typically cost more than rural areas because accident rates are higher. Buying higher liability limits raises your premium, but the increase is usually modest — raising your limit from 25/50/25 to 100/300/100 might add $10 to $30 per month depending on your insurer and state.

Different insurance companies price liability differently, so comparing quotes from at least three insurers can save you money. Some insurers offer discounts for bundling home and auto insurance, paying in full upfront, or completing a defensive driving course.

Liability insurance versus other types of car insurance

Collision insurance covers damage to your own vehicle from hitting another car or object. Comprehensive insurance covers damage from weather, theft, vandalism, or hitting an animal. Medical payments coverage (or personal injury protection in some states) covers your own medical bills after an accident, regardless of who caused it. Uninsured motorist coverage protects you if you're hit by a driver without insurance or with too little insurance.

Liability is the only type required by law in most states. Collision and comprehensive are required only if you have a car loan or lease. Medical payments and uninsured motorist coverage are optional but recommended, especially if you don't have health insurance or if you live in an area with many uninsured drivers.

Frequently Asked Questions

Does liability insurance cover me if I'm driving someone else's car?

Your liability policy typically covers you when you drive someone else's car with their permission, as long as you're not regularly borrowing it. If you borrow a car occasionally, your policy usually extends to it. However, the car owner's insurance is the primary coverage, and your insurance is secondary. If you regularly drive someone else's car, you should be listed as a driver on their policy.

What if someone sues me for more than my liability limit?

You are responsible for paying the amount above your limit. The other person can place a lien on your home, garnish your wages, or seize your bank accounts to collect. This is why many people carry liability limits higher than their state's minimum — the extra cost is small compared to the risk of a large judgment against you.

Can I get liability insurance without a driver's license?

Most insurance companies require a valid driver's license to buy a policy. However, some insurers may insure you if you have a learner's permit or if you're in the process of getting a license. You should contact insurers directly to ask about their specific requirements.

Does liability insurance cover intentional damage?

No. Liability insurance covers accidents and unintentional harm. If you intentionally damage someone's property or injure them, your insurance will not pay, and you could face criminal charges in addition to a civil lawsuit.

What's the difference between bodily injury and property damage liability?

Bodily injury liability covers medical expenses and other costs related to injuries to people. Property damage liability covers damage to vehicles, buildings, or other property. They have separate limits on your policy, so you could have $100,000 in bodily injury coverage but only $25,000 in property damage coverage, for example.