Car liability insurance is a type of insurance policy that provides financial coverage for the driver of the other vehicle when you’re at fault in an accident. It is required in almost every state.
Also referred to as auto liability insurance, this insurance covers two aspects of a car accident – the bodily injuries of the other driver and passengers and the property damages that you caused to the driver including car repair costs, broken fences, damaged mailboxes, and others.
Nearly every state requires drivers to own a minimum liability insurance coverage of 25/50/25 before driving around town, though this ratio varies from state to state.
The first 25 refers to $25,000 and is allotted to the bodily injury of each person in an auto accident.
The second 50 refers to $50,000 disbursed per accident for all injured persons.
The last 25 is $25,000 given by your insurer to settle all property damages that you caused with a car accident.
Most times, these minimum liability insurance amounts are inadequate to settle the costs of an accident, so it’s recommended to buy more liability coverage so your covered limit would be able to settle all damages with ease.
Car liability insurance also covers legal fees and court settlements should the driver you rear-ended with your car take you to court.
What does car liability insurance cover?
Car liability insurance covers three things when you’re legally held responsible for an accident – bodily injuries, property damages, and legal fees.
- Bodily injuries: Auto liability insurance covers the medical treatments, prescription drugs, and therapeutic procedures it takes to recover each and all injured persons in a car accident.
- Property damage: Liability insurance repairs all damaged properties belonging to the other driver such as the car, fences, mailbox, and even storefronts.
- Legal fees: Car liability insurance takes care of your court settlement fees in case the aggrieved driver decides to take legal action against you.
What does liability mean in car insurance?
Liability in car insurance refers to the medical and property repair expenses that you’ve incurred on your policy coverage when you hit another vehicle.
The medical costs of treating the injured driver and car passengers, the repair costs for the damaged car, and other properties like fences are seen as a liability by your insurance company that’ll foot the bills up to the covered limit of your liability insurance.
How much liability insurance do I need?
You need more than the minimum car liability insurance requirement in your state. The minimum liability insurance requirement is likely not going to be enough to cover heavy-impact accidents, except for fender-bender cases.
As an example, the minimum bodily and property damage insurance in California is 15/30/5, meaning that $15,000 settles the injury of one person, $30,000 covers the injury of all per accident, and $5000 handles all property damages.
If you hit a car and get up to three persons injured and their total medical costs end up as $80,000, your insurance company will pay up to $30,000 for the accident and leave you to complete the remaining $50,000 out of pocket.
All it takes is one severe accident to ruin your credit history and take you several steps back.
The coverage ratio of liability insurance most people have found out they need is 100/300/100.
Some require even higher.
It’s best to speak with an independent agent broker to find out the realistic liability coverage you’ll need in your state.
You can’t afford to depend on the low minimum liability insurance in your state. It’s most likely not going to be enough.
To get started, though, you could check out the minimum liability insurance requirements for your state to have a proper estimate of what’s mandatory.
What isn’t included in car liability insurance?
Car liability insurance only covers the expenses and repair costs for the driver you hit. It doesn’t reimburse your losses. Here are things that car liability insurance doesn’t cover:
- Damages to your car
- Medical costs for your injuries and that of your car passengers
- Mishaps to your vehicle caused by natural disasters like storms or attacks from wild animals
These things are not covered by car liability insurance.
However, if you need auto insurance settlement for these kinds of accident scenarios, here are the car insurance policies to sign up for:
- Collision coverage: This coverage covers the repair of your car if you collide with another car or an object. It doesn’t matter if you’re at fault, your insurer will reimburse you for your car repair cost.
- Comprehensive coverage: If your vehicle gets damaged by natural disasters, attacks from wild animals, or any other non-collision events, comprehensive coverage is taken out to settle the repairs of your car.
- Medical coverage payment (MedPay): This covers professional medical treatment for you and your car occupants when involved in an accident, even if you’re at fault. Doctor visits, drug prescriptions, ambulance costs, and other medical costs are settled with MedPay.
- Personal Injury Protection (PIP): Just like MedPay, PIP covers the medical costs of you and your car passengers. This coverage goes further to pay you for the lost wages you might have incurred as a result of the accident, as well as reimburse you for tasks that you can no longer do while recovering, such as cleaning the house.
There are other types of car insurance that cover different scenarios of auto accidents, from taking care of your transportation costs while your car is being repaired to paying you whenever your car suddenly breaks down in the middle of the road.
Related: Different Types of Car Insurance
Who needs car liability coverage?
Everyone driving a car needs liability coverage because most states require bodily injury protection and property damage (liability insurance) before driving.
In the few states where liability insurance is not required, most car insurance needs drivers to get a full coverage policy as one of their mandatory procedures.
And to get full coverage, you’ll need liability insurance because it is usually packaged together with collision and comprehensive coverage.
Also Read: What Is Full Coverage Car Insurance? Find Out Now
Things to consider when purchasing liability coverage
- Shop for car insurance discounts: There are so many discounts that auto insurance companies have made available to incentivize drivers to buy more coverage and drive safely. Some popular discounts involve a safe driving discount, a discount for combining your home and car insurance together, a discount for professional certifications, and others. You’re most likely already qualified for some discounts. Ask your insurance company or independent broker and take advantage of those discounts you qualify for.
- Work with an agent to determine how much liability coverage you need: The minimum liability coverage in most states is sorely inadequate and could have you in serious financial trouble if you encounter a severe accident because you’ll be forced to pay the remaining amount from your pocket. An independent broker would have a good idea of how much liability coverage is feasible and convenient in your state because they must’ve worked with countless other drivers in your state. Take advantage of their experience.
What is the difference between liability and full coverage auto insurance?
The difference between liability and full coverage auto insurance is that while liability coverage reimburses the driver of the car you hit for medical costs and property repairs, full coverage auto insurance adds liability insurance to collision and comprehensive coverage.
Liability coverage is a legitimate type of car insurance policy, but full coverage is not. Rather, full coverage is a bundle of mostly liability coverage, collision coverage, comprehensive coverage, and any other coverage a car owner needs according to his peculiar situation.
Also, liability coverage only reimburses the driver of the car you rear-ended in an auto accident. It doesn’t cater to your losses at all. But full coverage auto insurance was made to settle and pay you for your car repair and maintenance in the event of an accident with the addition of comprehensive and collision coverage.
Lastly, liability insurance has no deductible attached to it. A deductible is the money you pay when filing an insurance claim before your insurer covers the remaining claim. However, full coverage auto insurance comes with deductibles because of the presence of comprehensive and collision coverage.
What is the difference between liability and accident insurance?
The difference between liability and accident insurance is that liability insurance only sorts out the bodily injuries and property damage of the driver you hit, not you or your passengers, while accident insurance takes care of your personal medical expenses resulting from an accident.
Another difference is that your liability insurance settlement is written via check by your insurance company and sent to your personal injury lawyer, who takes his cut and hands you the remaining percentage. However, accident insurance gives you a cash payout directly to settle your doctor visits, medical exams, and any medical treatments you’re to undertake while you recover from an accident.
The last difference between liability insurance and accident insurance is that liability insurance has no deductibles to pay before your insurer settles you. Meanwhile, accident insurance includes your deductible among the cash payout they hand over to you.
