What is car insurance liability?

Liability car insurance pays for any damage you cause and any medical expenses you incur in an accident to pedestrians, passengers, cyclists, drivers, and property owners. Most states require all drivers to at least have liability auto insurance coverage. It’s recommended to carry more coverage as liability insurance will not cover any damages to your property or medical bills. Start comparing insurance quotes online to find the best rates for the level of coverage you need.

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

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Reviewed by Brad Larsen
Licensed Auto Insurance Agent

UPDATED: Oct 30, 2020

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You may already know that you have to carry car insurance to receive or renew your vehicle registration, and that you must maintain insurance in order to operate a motor vehicle. Looking for cheaper car insurance quotes on the internet has been a very useful tool to consumers. FREE car insurance can be found by using your car insurance quote search tool! All it takes is putting in your ZIP code!

Consumers typically accept auto insurance as a part of life, without considering how their insurance protects them. Because liability coverage is a critical component of auto insurance, it is essential that you understand this important coverage. Check to see what coverage you could get by entering in your ZIP code and FREE car insurance quotes!

Liability Coverage Protects Others

The primary purpose of liability auto insurance coverage is to protect other pedestrians, passengers, cyclists, drivers and property owners from incurring financial loss if you cause an accident while driving a motor vehicle. This coverage pays for medical and rehabilitative expenses incurred by others if you cause injuries as a result of an accident.

Liability coverage also pays for damage you cause to property. This includes vehicles owned by other drivers, as well as personal property contained in the vehicle at the time of the accident. It also includes private property such as buildings, mailboxes, and fences, as well as government-owned property such as street signs and signals.

It is important to remember that auto liability insurance does not pay for your medical or rehabilitative expenses if you cause an accident. It also does not pay for damage to your car, or for damage to personal property located inside your vehicle.

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Liability Coverage Helps Prevent Lawsuits

Although liability auto insurance coverage is designed to provide financial protection for others, it also helps shield you against lawsuits to recover damages and injury costs after an accident. If you cause an accident and do not carry liability coverage, a person who has suffered injuries or property damage may pursue legal action against you to recover the costs of damages or legal expenses.

This can result in a judgment against you, which makes you legally liable for these costs. If a person obtains a judgment against you, he or she may attach your personal property, bank account balances, or a portion of your wages in most states.

Choosing Your Liability Insurance Limits

When you purchase an auto insurance policy or obtain a quote, you will need to choose your coverage limits.

This is important for ensuring that your policy provides adequate protection for you, your passengers, and other motorists.

Most states use a split-limit format for liability coverage limits. This means that the policy provides one maximum per-accident limit per person for bodily injury liability coverage, and an aggregate limit for all injuries sustained by others in a single accident. It also provides a separate per-accident limit for property damage.

In some states, drivers can opt for combined single limit liability coverage instead of split-limit coverage. A combined single limit provides a maximum payout for all injuries and property damage you cause in an accident. The maximum payout can be applied to medical expenses, property damage costs, or both.

State laws require all drivers to carry minimum limits, which vary substantially by state.

The minimum limits are required for drivers to legally operate a motor vehicle. Without these coverage limits, you can incur a license suspension, and may possibly incur fines and reinstatement fees, if you are caught driving uninsured.

Some states also use “random sampling,” which involves sending letters requesting proof of coverage from registered vehicle owners. If you receive a random sampling letter, you must provide proof of liability insurance coverage to avoid license suspension.

The minimum limits required by your state are not typically sufficient to protect your financial stability if you cause an accident. Medical expenses and property damage costs often exceed these limits, even if you only cause a minor accident.

You can purchase higher liability limits than those required by your state’s financial responsibility laws to enhance your protection. Auto insurance companies commonly offer bodily injury liability limits up to $300,000, and property damage liability limits up to $100,000. Depending on your company’s guidelines, you may be able to purchase even higher limits.

Some Drivers Do Not Carry Liability Auto Insurance

Despite state laws that require drivers to carry minimum limits of liability insurance, some drivers in each state elect to operate motor vehicles without carrying this coverage. The percentage of uninsured drivers varies considerably by state. For example, about 29 percent of drivers in New Mexico do not carry insurance, while only about 4 percent of Maine drivers are uninsured.

If you have an auto insurance policy that only provides liability coverage, and you are involved in an accident with a driver who does not carry liability insurance, you will have to pay for your own property damage and medical expenses. You may choose to sue the at-fault driver, but this does not guarantee that you will ever be able to fully recover your losses.

Uninsured motorist coverage can help protect you from financial disaster if you are hit by a driver with no liability insurance. This coverage helps pay for your medical and rehabilitative expenses, up to your uninsured motorist coverage limits. You can purchase uninsured motorist coverage in an amount equal to your liability coverage limits.

Underinsured motorist can provide added protection against financial loss if you are struck by a driver that carries insurance, but whose liability limits are not enough to pay for your losses. As with uninsured motorist coverage, you can only purchase underinsured motorist coverage in an amount up to your liability limits.

To illustrate, suppose that you carry liability, uninsured motorist, and underinsured motorist limits of $300,000, and you are hit by a driver who only carries $25,000 in liability coverage. If you sustain $100,000 in injuries, your underinsured motorist coverage would pay the $75,000 not covered under the at-fault driver’s policy.

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Coordination with Personal Injury Protection

In some states, such as Florida and Kentucky, drivers may purchase no-fault coverage, also called personal injury protection, which pays for their expenses regardless of who causes an accident. Even though no-fault coverage covers your medical and rehabilitative expensive, limits for this coverage are typically not enough to cover expenses for severe injuries.

For this reason, liability coverage is still required in no-fault states. The at-fault driver’s liability coverage would pay for expenses after your no-fault coverage has been exhausted. Put in your ZIP code into the car insurance quote search tool!

Also, only part of the personal injury protection coverage available in some states applies to medical expenses. For example, in Kansas, a portion of this coverage is reserved for lost wages and funeral expenses. This makes liability an essential coverage, even in no-fault states.

Although liability coverage can seem complex, it is actually a fairly simple coverage to understand. It simply protects your assets and provides protection for others when you are driving. Paired with other auto insurance coverages, liability coverage is a strong tool for preventing financial disaster. Check to see what your FREE liability coverage quotes would be by entering in your ZIP code!

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