When you’re shopping for auto insurance, you can select several types of coverage depending on your needs and state insurance laws. Almost all states require liability insurance, and it’s normally one of the most expensive portions of an auto insurance policy. So it’s important to understand what you’re paying for.
What Is Liability Car Insurance?
Liability insurance pays others when you’re at fault for damage to their cars or property, or injuring them in a car accident. Property damage can include more than just other people’s cars. If you accidentally hit the gas instead of the brakes and accelerate into a friend’s home, liability can cover the damage done to the house.
Liability insurance also covers legal fees for defending you in a liability lawsuit. Paying your defense costs benefits both you and your insurance company. You get legal fees paid for, and the insurer makes sure you’re not defending yourself and losing a case that they have to pay a settlement for.
Reading Liability Car Insurance Limits
You’ll buy liability insurance in coverage “limits,” meaning the most the insurer will pay. Liability insurance coverage limits are often shown as three numbers, such as 10/50/25. The numbers represent coverage amounts in thousands of dollars, such as:
- 10 represents $10,000 of bodily injury coverage per person.
- 50 stands for $50,000 of bodily injury coverage per accident.
- 25 means you’ll have $25,000 of property damage coverage per accident.
If the damage or injuries you cause surpass your liability insurance limits, you can still be sued for the rest. That’s why if you buy low liability limits to save money upfront, you could find yourself facing big bills later if you cause an expensive accident.
And accident costs can add up fast. For example, say you’re not paying attention to the road and you rear-end a car, causing that car to rear-end another car. Damage can easily exceed a low limit like $25,000, and medical bills for injuries can quickly mount into many thousands of dollars.
Minimum Liability Requirements and Average Premiums by State
|State||Minimum liability requirements||Average annual premium for liability insurance|
|District of Columbia||25/50/10||$674.79|
|Sources: Requirements – Insurance Information Institute. Average premium – National Association of Insurance Commissioners, Auto Insurance Database Report 2018|
States That Don’t Require Liability Insurance
New Hampshire doesn’t require liability insurance, but if you buy it, you must buy the minimum shown above. Still, New Hampshire drivers have to show that they can meet the financial responsibility of a car accident. You must prove you can pay up to:
- $25,000 for injury or death to any one person.
- $50,000 for injury to or death to two or more persons in any one accident.
- $25,000 for property damage in one accident.
New Hampshire drivers can prove they have financial responsibility by buying auto insurance, buying a surety bond, or showing a receipt that they deposited securities in an amount that meets the state’s minimum auto insurance requirement. These securities would then be used if there’s a judgment against you in a car accident.
The option to deposit money rather than buy car insurance isn’t unique to New Hampshire. Some other states allow you to opt out of liability insurance if you can prove you’re financially responsible by posting a bond or depositing money. Most drivers don’t know about the other options, and may find auto insurance more convenient anyway.
Virginia drivers can pay a $500 uninsured motorist fee each year and skip auto insurance, but you’ll run the risk of being totally responsible for paying for damage and injuries if you cause an accident.
What Happens If I’m Caught Driving Without Insurance?
If you’re caught driving without liability insurance, you’ll face the consequences governed by state laws. These typically include a fine and suspension of your driver’s license for a first offense. Additional offenses often mean larger fines and longer license suspension. Some states such as Colorado, Michigan and New Jersey include possible prison time.
How Much Does Liability Insurance Cost?
The price you pay for liability insurance will be based on many factors and often include: your address, how much coverage you buy, gender, age, driving history, claims history, vehicle model, credit, discounts and more.
Because you won’t know how a particular company will calculate its rates, the best way to find out prices is to get multiple car insurance quotes.
How Much Liability Insurance Do You Need?
Determining how much liability insurance you need can seem like guesswork. While states have minimum liability insurance requirements, the minimums could very likely be too low for your individual situation.
If you have assets that someone could go after in a liability lawsuit against you, consider high limits of liability insurance. Coverage limits of 100/300 are common, and can go higher. Remember, once your liability amount has been paid out, you’re still on the hook for remaining injury and damage bills for others. Progressive suggests buying enough bodily injury liability coverage to equal or surpass your net worth.
Some states require only $15,000 of bodily injury liability coverage per person. You could quickly exceed this amount if a person visits the emergency room with severe injuries.
The average bodily injury liability claim nationwide was $17,862.21, according to the most recent data from the National Association of Insurance Commissioners.
Property damage can also quickly add up, and the cost to repair vehicles has been rising steadily. The average cost of repairs to brand-new cars rose 4.7% from the year between August 2015/July 2016 to August 2018/July 2019, according to CCC Information Services. For vehicles one to three years old, the increase was 5.9%.
The average property damage claim was $3,952.11, according to the National Association of Insurance Commissioners.
How to Get More Liability Insurance If You Need It
Most auto insurance companies only allow you to buy a certain amount of bodily injury liability coverage, which in some cases is $500,000 for injuries. If you have extensive assets that could be on the hook in a lawsuit, consider umbrella insurance. Umbrella insurance provides an extra layer of liability insurance above auto and home insurance. It kicks in after you exhaust the policy limits of the underlying insurance policies. It’s typically available for coverage of $1 million and up.
Umbrella insurance costs about $380 a year for $1 million to $2 million in coverage, according to Trusted Choice, a group of independent insurance agents.
You generally need to have certain coverage limits already in place in order to buy an umbrella policy. For instance, you may need liability coverage worth $300,000 on your auto and home policies before you can add umbrella insurance.
What About Your Own Car?
While liability car insurance provides crucial coverage, it only pays other people, not you. If you have your own car damage, liability insurance won’t help. Instead, consider comprehensive and collision coverage. Together they pay for repairs to your car after a wide variety of problems, including crashes with other cars, hail, floods, fire, falling tree branches, vandalism and more.