Auto liability insurance is a type of car insurance coverage that’s required by law in most states. If you cause a car accident — in other words, if you are liable for the accident — liability coverage helps pay for the other person’s expenses.
Auto liability coverage comes in two forms: bodily injury liability coverage and property damage liability coverage. Drivers in most states must have both types of coverage.
WHAT IS COVERED BY LIABILITY INSURANCE?
Many types of insurance policies include liability insurance. Generally speaking, it helps pay to repair another person’s property or for their medical bills if the policyholder is found responsible for causing the damage or injuries.
Auto liability insurance helps cover another person’s medical expenses and property damage via these two types of coverage:
Bodily injury liability coverage (sometimes abbreviated as “BI”)
- If you’re at fault for an accident that injures another person, bodily injury liability coverage helps pay for their medical expenses. For instance, this coverage can help you avoid paying out of your own pocket for the injured person’s X-rays and treatment.
Property damage liability coverage (sometimes abbreviated as “PD”)
- If you cause an accident that damages someone else’s property (their car, for example), property damage liability coverage helps pay for repairs. For example, if you rear-end another car, this coverage can help prevent you from paying out of pocket to repair the other driver’s vehicle.
LIABILITY INSURANCE COVERAGE LIMITS
The amount your insurer will pay for a covered liability insurance claim depends on the coverage limits you choose. Each state sets minimum coverage limits for bodily injury liability and property damage liability that drivers must purchase, but you may decide to buy additional coverage. You may see three liability coverage limits on your car insurance policy:
Property damage liability limit.
- This is the maximum amount your insurer would pay to repair damage you cause to another party’s property. The maximum payout would not exceed the limit you’ve set.
Bodily injury liability limit per person.
- This establishes a maximum payout for each individual who is injured in an accident that you cause.
Bodily injury liability limit per accident.
- This sets a cap on the total amount that your insurance provider will pay out for all medical expenses other people incur from a single accident you cause. It’s important to set this limit at an amount that makes you comfortable, as it may be needed to help pay for the medical expenses incurred by multiple people.
Most insurers package bodily injury and property damage limits together. For example, you may be able to purchase auto liability coverage with limits like the following:
- 25/50/10 ($25,000 BI per person limit, $50,000 BI per accident limit, $10,000 property damage limit)
or - 100/300/50 ($100,000 BI per person limit, $300,000 BI per accident limit, $50,000 property damage limit)
Your coverage limits will depend on the packages your insurer offers — in other words, you may not be able to choose standalone limits for bodily injury or property damage coverage.
HOW MUCH DOES LIABILITY INSURANCE COST?
The amount you’ll pay for liability insurance is based on a number of factors, including how much coverage you purchase. The higher your coverage limit, the more you’ll likely pay for liability insurance. Your insurance agent can tell you how much your coverage will cost if you adjust your limit.
HOW MUCH LIABILITY INSURANCE SHOULD YOU BUY?
Any costs that exceed your liability coverage limits are your responsibility — in other words, you’d have to pay them out of your own pocket. That’s why it may be a good idea to increase your auto liability limits above the state’s minimum requirements by purchasing more coverage.
Consider the following: You are at fault for a crash that injured three people in another car. Your bodily injury liability limit per person is $50,000 and your bodily injury limit per accident is $100,000. If Person 1’s medical bills total $40,000, Person 2’s cost $30,000 and Person 3’s cost $25,000, you’re likely covered. Each person’s bills were under $50,000 (your bodily injury limit per person), and the total cost of injuries is $95,000, which is lower than your $100,000 bodily injury limit for a single accident.
But suppose all three people had $50,000 in medical bills, totaling $150,000. In that case, your bodily injury liability coverage would pay $100,000 toward those bills, and you may need to cover the remaining $50,000 yourself.
WHAT DOESN’T LIABILITY INSURANCE COVER?
Liability coverage typically doesn’t pay to repair damage to your own car after an accident — collision coverage helps with that. It also doesn’t pay to repair damage caused by other factors, such as hail, which may be paid by comprehensive coverage.
Liability coverage also does not extend to costs associated with your own injuries after an accident you cause. If you want this type of coverage, you may want to consider medical payments coverage. Your insurance agent can help answer questions about auto liability insurance or your state’s coverage requirements.
Talk to a local insurance agent to discuss your options and choose appropriate liability coverage limits for your situation.