insurance

What Is Liability Coverage?

Accidents happen, such as a fender bender in a parking lot, a collision with another car, or even an unfortunate encounter with a deer. While these incidents are often unavoidable, the financial implications can be significant.

That’s where liability insurance comes into play. Liability coverage helps protect you from the financial burden of causing property damage or bodily injury to others in an accident if you’re at fault. In this article, you’ll learn about liability insurance, its importance, and how to choose the right coverage for your needs.

Liability car insurance is a type of coverage that helps protect you financially if you’re responsible for an accident that causes property damage or injury to someone else. It helps pay for the other party’s losses or damages, up to a maximum amount, helping you avoid high out-of-pocket expenses.

If there’s an accident and you’re at fault, the injured party or property owner files a claim with your insurer. After reviewing the incident, your insurer determines fault and pays out the appropriate amount to cover the damages or injuries up to your policy limits.

Two motorists discussing over responsibility for car accident.

Why Is Liability Coverage Important?

Liability coverage isn’t just a checkbox on your auto insurance policy; it’s a crucial part that can help safeguard your financial future and provide help peace of mind.
Accidents can be costly, especially if you’re found at fault. Medical bills for injuries, vehicle repair costs and potential legal fees can quickly add up. Liability coverage acts as a financial safety net, helping protect your personal assets—your savings, investments and even your home—from being used to cover these expenses.
General liability coverage also protects others. If you cause an accident, your coverage ensures that the people you injured or whose property was damaged are compensated for their losses, and that the financial burden doesn’t fall on them to make things whole again. Learn more about full coverage car insurance, which often includes liability insurance.

Types of Liability Coverage

Liability insurance has two types of coverage, each designed to address different parts of an accident where you’re at fault.

Female motorist with whiplash injury in car crash getting out of vehicle.

Bodily Injury Liability (BIL)

This covers medical expenses, lost wages and even legal fees for the other party if they are injured in an accident you caused. For example, if you rear-end another car and the driver suffers whiplash, your BIL would cover their treatment costs and any income they lose while recovering.

BIL typically covers a wide range of expenses, including:

Emergency room visits
Hospital stays
Surgeries and other medical procedures
Doctor’s visits and consultations
Medication and prescription drugs
Physical therapy and rehabilitation
Lost wages due to inability to work
Pain and suffering

Two drivers evaluating the damage from the car accident.

Property Damage Liability (PDL)

This covers the cost of repairs or replacement for any property damaged in an accident you caused, such as other vehicles, fences, buildings or other structures. For example, if you accidentally back into someone’s mailbox, your PDL will pay for its repair or replacement.

PDL will pay for its repair or replacement.

Costs of repair or replacing damage to the other person’s vehicle
Costs of repair or replacing damage to the other property
Rental car costs for the other person while their vehicle gets repaired

Both types of liability coverage are essential to help protect you from financial liability if you cause an accident.

Happy family traveling by car on summer day.

How to Choose the Amount of Liability Coverage

While liability coverage is mandatory in most states, the minimum required amounts can fall short of providing adequate protection. That’s why it’s important to understand how to choose the amount of liability insurance for your needs.

In most states, liability insurance coverage is mandated to drive your vehicle legally. The minimum coverage limits vary by state, though you can always purchase more coverage. Driving without it can result in fines, a suspended license or even jail time.

When determining how much liability coverage you need, consider the following factors:

Personal Assets: If you have significant assets, such as savings, investments or property, you’ll want to ensure your liability coverage is high enough to protect them.
Driving Habits: Consider higher liability limits if you drive frequently or have a history of accidents.
Vehicle Value: If you drive a high-value car, you’ll need higher property damage liability limits to cover the cost of repairs or replacement.

If the costs of an accident exceed your coverage limits, which is not uncommon, you could be personally responsible for the remaining expenses.

Clients engage with a car insurance agent beside a wrecked vehicle. They examine the policy details, assess the damage, and finalize paperwork related to the insurance claim and repairs.

Liability Coverage Limits

Liability limits range from $10,000 to $50,000 for BIL and $5,000 to $25,000 for property damage. These numbers represent the maximum payout for each part of the claim. Most insurers bundle these together. For example, your insurer will pay a maximum of $25,000 per person for bodily injuries in a single accident, up to $50,000 for all bodily injuries combined in a single accident, and $25,000 for property damage per accident. It’s often written as 25/50/25.

The Cost of Liability Coverage

Several factors affect the cost of liability coverage in your car insurance policy, including your driving record, the type of vehicle you drive, and your coverage limits and deductibles.

Premiums vary by state, but there are some things you can do to help lower auto premium costs, including maintaining a clean driving record, bundling your insurance and shopping around.

Common Misconceptions About Liability Coverage

Liability insurance covers your injuries and damages: General liability insurance only covers the costs associated with injuries or damages you cause to others in an accident. It does not cover your medical expenses, vehicle repairs or any other losses.
Liability insurance alone is enough protection: While essential, it’s not the only coverage you need for comprehensive protection on the road. Collision and comprehensive coverage can also help protect you from a wide range of potential risks. Liability car insurance is essential to any auto insurance policy, providing crucial protection for damages and injuries you may cause to others in an accident. Understanding the importance of adequate coverage limits can help you choose the right policy for your needs.

This Information Is Being Provided For General Informational Purposes Only. The Auto Club Group Does Not Assume Any Liability In Connection With Providing This Information. Coverage Is Subject To All Policy Terms, Conditions, Exclusions And Limitations.

Discounts And Savings Opportunities Subject To Eligibility Requirements. Subject To Underwriting Requirements. Personal Lines Insurance Is Underwritten By One Of The Following Companies: Auto Club Insurance Association, Memberselect Insurance Company, Auto Club Group Insurance Company, Auto Club Property-Casualty Insurance Company, Auto Club South Insurance Company, Auto Club Insurance Company Of Florida, Or Nonaffiliated Insurance Companies. ©2024 The Auto Club Group. All Rights Reserved.