What Is Liability Car Insurance (and How Much Do You Really Need)? 

Liability car insurance is like “my bad” insurance. If you cause an accident, it helps to cover the other driver’s various bills that you’d otherwise be liable for, saving you thousands or even tens of thousands of dollars in the process. 

But what exactly does it cover? How is it different from collision insurance, and how much liability insurance do you need? 

Erika Taught Me

  • Liability insurance covers the other drivers’ repair bills, medical bills, lost wages, and potential legal bills after you cause an accident. 
  • Auto liability insurance is required in 48 out of 50 states. New Hampshire and Virginia let you opt-out if you’re wealthy enough or pay an annual $500 fee, respectively. 
  • Given the average liability claim was $28,000+ in 2021, your state minimum requirements probably won’t cut it. Consider having at least 50/100/50 to start, 100/300/100 once you can afford it.

What is liability car insurance? 

Liability coverage handles the costs you owe other people after an at-fault accident — in other words, your liability. 

Let’s say you rear-end someone in traffic and they get whiplash. Their car needs major repairs, their neck needs medical treatment and they have to take a week off of work to recover. You also find out that they’re suing you for “pain and suffering,” i.e. increased stress and back pain as a result of the accident. 

In total, you’re on the hook for:

  • Repair bills
  • Medical bills
  • Lost wages
  • Legal bills


Luckily, liability insurance coverage includes all four of these. But to be clear, it only covers the other driver and their passengers — not you or your passengers. 

This coverage is commonly expressed as three numbers, such as 25/50/20, that represent liability limits. This translates to $25,000 in bodily injury per person (e.g. medical bills), $50,000 in bodily injury per accident, and $20,000 in property damage liability.

In other words, if you cause an accident, your liability car insurance would cover up to $25,000 in medical bills per victim — up to $50,000 total — and up to $20,000 in repair bills for physical property you damaged, such as cars or fences. 

Now, if you’re thinking $20,000 doesn’t sound like enough, well, you’re right. But we’ll discuss how much liability car insurance you really need later on. 

For now, how does liability stack up against collision and comprehensive insurance? 

Liability vs. collision

In the event of a road accident, liability car insurance would cover the other driver’s repair bills and medical expenses. Collision coverage, on the other hand, would only cover your repair bills. 

So if you hurt your neck and smashed up your car, your collision coverage would only help with the latter (minus your deductible). Your medical expenses would be covered either by your primary medical insurance or your MedPay auto insurance if you have it. 

Liability vs. comprehensive

A comprehensive auto insurance policy covers stuff that “happens to” your car outside the context of a road accident — things like theft, vandalism, weather damage, trees falling, animal attacks, and more. Liability, on the other hand, covers the stuff you owe the other driver within the context of a road accident. 

Put another way, if liability insurance is “my bad” insurance, comprehensive is “bad luck” coverage. 

What does liability car insurance cover? 

As mentioned above, this insurance covers the other person’s repair bills, medical bills, lost wages, and legal fees if they try to sue you or your insurance. 

Liability car insurance is split into two main types, and it’s important to know the difference so you can determine how much of each type to purchase later. 

Bodily injury liability coverage

In the event of a car accident, bodily injury liability covers the other person’s medical costs, lost wages, pain and suffering, and — should the worst happen — funeral expenses. It can also cover your legal defense should they or their family file a lawsuit against you. 

Property damage liability coverage

Property damage liability helps to cover the cost of repairing or replacing the victims’ damaged property. This can include the other driver’s vehicle itself, the stuff inside the vehicle that was damaged (e.g. a laptop crunched inside the trunk), and other things you may have hit like signs, fences, or buildings. 

Is liability car insurance required? 

Almost all states (48 out of 50) require you to carry a minimum amount of bodily injury liability and/or property damage liability insurance at all times. The two exceptions are New Hampshire and Virginia. 

  • New Hampshire has a quirky law that basically states “Hey, if you can prove to us that you’re rich enough to pay for someone else’s bills out-of-pocket after causing an accident, we won’t make you buy separate insurance.”

    Still, we can’t imagine why a smart, rich person would rather risk paying $50,000+ out of pocket than pay $900 a year for liability insurance, but hey, the option’s there if you’re a member of the Concord elite.
  • Virginia’s approach to opting out of car insurance is arguably even quirkier. Technically, the state requires all drivers to carry a minimum of 30/60/20 in liability car insurance coverage. However, you can “opt out” of the requirements by paying a $500 Uninsured Motor Vehicle (UMV) fee each year.
  • According to Insure.com, the average cost of state-minimum liability insurance in Virginia is just $469 per year so we’d strongly recommend getting quotes before paying $500 for the right to not pay $469!

If you live in one of the other 48 states, you can see your state’s individual liability insurance requirements

Woman signing car insurance policy document. Guide to liability car insurance and how much you need.

Do you need more than your state’s minimum liability car insurance? 

Need? No. 

Want? Most definitely. 

The cold, hard truth of the matter is that liability claims can be extremely expensive. According to the Insurance Information Institute (iii), the average “severity” (e.g. cost) of a liability claim in 2021 was $22,734 for bodily injury and $5,314 for property damage. Combined, that’s $28,048 per accident. 

And that’s the average, meaning 50% of accidents are more expensive than that. 

For context, Louisiana only requires you to carry 15/30/25 in liability insurance. If that’s all you have and you cause the “average” accident, your insurance will only cover the first $15,000 of the victim’s medical bills and you could be sued for the remaining $7,734. 

If you cause an accident that totals a car or causes multiple injuries, your liability could well exceed $100,000 out of pocket. The victims and their attorneys could come after your savings, assets, and even your home to get their due. 

That’s why it’s well worth buying some “extra padding” when it comes to liability car insurance. According to a rate analysis by CarInsurance.com, the average cost to go from the nationwide average for state minimums to 50/100/50 is just $6 per month. Heck, if you can afford it, keep going to 100/300/100. It’ll be worth it for the added peace of mind. 

FAQs

Is full coverage better than liability car insurance? 

Technically speaking, yes. Full coverage consists of liability, collision, and comprehensive insurance bundled together and is typically required for most leased or financed vehicles.

What’s the difference between liability car insurance and general liability insurance? 

Broadly speaking, liability car insurance covers your legal liability after you cause a road accident. General liability is more for businesses and contractors and covers your legal liability if your business, products, or services cause harm or property damage.

Related: How much life insurance do I need for my family?

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I'm an award-winning lawyer and personal finance expert featured in Inc. Magazine, CNBC, the Today Show, Business Insider and more. My mission is to make personal finance accessible for everyone. As the largest financial influencer in the world, I'm connected to a community of over 20 million followers across TikTok, Instagram, YouTube, Facebook and Twitter. I'm also the host of the podcast Erika Taught Me. You might recognize me from my viral tagline, "I read the fine print so you don't have to!"

I'm a graduate of Georgetown Law, where I founded the Georgetown Law Entrepreneurship Club, and the University of Notre Dame. I discovered my passion for personal finance after realizing I was drowning in over $200,000 of student debt and needed to take action-ultimately paying off my student loans in under 2 years. I then spent years as a corporate lawyer representing Fortune 500 companies, but I quit because I realized I wanted to have an impact; I wanted to help real people and teach them that you can create a financial future for yourself.

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Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. This in no way affects our recommendations or article content.

Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. This in no way affects our recommendations or article content.

Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. This in no way affects our recommendations or article content.