Liability Car Insurance: What It Is, What It Covers, and How Much You Need

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Drivers are required to have liability coverage in almost all U.S. states, and it’s a key part of every car insurance policy. States require this type of coverage because it pays for injuries or property damage you cause to others while driving. If you don’t have liability insurance, you might have to cover their vehicle repair and medical costs out of pocket.

Keep reading to learn how liability coverage works and why it’s important. We’ll also help you determine how much liability insurance you need and outline several ways to get the best coverage for less.

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What Is Auto Liability Coverage?

Car liability insurance pays for injuries or property damage you cause to others in an at-fault auto accident.

Though state requirements vary, you must carry a minimum amount of liability insurance in nearly every state to legally drive. It’s important to understand what kind of coverage liability insurance provides and what it doesn’t so that you can ensure you’re adequately protected after an at-fault accident.

What Does Liability Insurance Cover?

man holding cell phone after car accident

Liability insurance provides two types of coverage: bodily injury liability and property damage liability. Here’s how they differ, as well as what liability coverage won’t cover.

Bodily injury liability vs. property damage liability

Bodily injury coverage — often referred to as BI coverage — pays for injuries you cause to others in an accident. This can include medical expenses like doctor’s visits, X-rays, and physical damage. It can also cover their lost wages if they miss work due to their injuries.

Property damage liability coverage — or PD coverage — pays for physical damage you cause to another person’s property, such as their car, fence, or home. It also covers damage to commercial property, like a building, guard rail, or utility pole.

For example: Let’s say you hit someone pulling out of a parking lot. Your bodily injury liability coverage can cover their medical care and lost wages while they’re healing from their injuries. Property damage liability insurance will cover their vehicle repair costs. Liability coverage can also pay for your legal defense if they sue you.

What doesn’t liability insurance cover?

Your liability auto insurance coverage won’t pay for your injuries or damage to your vehicle.

Comprehensive coverage and collision coverage — often combined with liability to create a “full-coverage” policy — pay to repair or replace your vehicle after an accident.

Medical payments coverage (MedPay), personal injury protection (PIP), or your health insurance can cover your medical bills, and they may cover your lost wages if you miss work due to your injuries.

How Much Does Liability Insurance Cost?

damaged car after accident

Liability insurance costs an average of $131 per month, according to data. It’s usually the cheapest policy option. In comparison, full coverage averages $271 monthly — more than double the cost of liability-only coverage.

Multiple factors determine your personal liability coverage costs, so the best way to find out how much you’ll pay for this type of policy is to compare quotes from several companies.

But first, let’s go over a few of the most important factors.

Factors that affect the cost of liability car insurance

Besides the liability coverage limits you choose, the most common factors affecting your premiums include your:

How to get cheaper liability insurance

Use these tips to get the cheapest auto liability coverage:

  • Ask about discounts. Insurance companies offer a wide range of discounts that can you can combine to maximize savings.
  • Only buy the amount of liability insurance you need. Ensuring you have enough liability insurance will provide financial protection if you cause a car accident. We’ll explain how to determine the minimum amount of liability coverage that’s right for you later in this article.
  • Shop regularly. Auto policy rates vary by insurance company. Shopping at each renewal period is a good idea, so you always know if your insurer is the most affordable option.
  • Buy a cheap car. Knowing which cars are the cheapest to insure can help you save on insurance coverage.
  • Take a defensive driving course. Completing state-approved defensive driver training can help you get a discount and improve your driving habits, helping you keep a clean driving record.

Is Liability Insurance Required?

State law requires drivers to have liability insurance in 48 states and Washington, D.C. If you can’t meet financial responsibility requirements in New Hampshire and Virginia, you must purchase liability coverage.

State laws vary on how much auto liability insurance you need to have. Many drivers may find that higher coverage limits are worth the extra cost.

Understanding when higher coverage amounts are necessary and how to read your policy limits can help you determine how much coverage you need.

How Much Liability Coverage Do You Need?

two people talking after car accident

You should purchase enough liability coverage to cover your net worth, which is your assets minus your debts. Here’s what to consider when determining your liability coverage needs.

Why you should consider higher liability limits

If you don’t have high enough liability limits, another driver in an accident can sue you for injuries or property damage that exceed your policy limits.

For example, let’s say you t-bone someone with a brand-new vehicle. Keep in mind that the average cost of a new car — more than $48,000 in 2023, according to Consumer Reports — is higher than many state-mandated property damage limits. In this scenario, you caused injuries to the driver and passenger, totaling $75,000 in medical bills, rehabilitation, and lost wages. The other car is totaled, and its actual cash value is $30,000.

You only have state minimum coverage, which is 25/50/25: $25,000 in bodily injury coverage per person, $50,000 in bodily injury coverage per accident, and $25,000 in property damage coverage. Since the vehicle damage and injuries total over your coverage limits, the other party sues for the extra amount.

In this hypothetical (but realistic) scenario, you’d be on the hook for $30,000 out of your own pocket. This can lead to garnished wages or a lien placed against your assets if you can’t afford that extra cost.

Many experts advise purchasing 100/300/100 property damage limits, but even increasing your limits from the state minimum to 50/100/50 will add double the protection at a relatively modest increase — often just a few dollars per month.

How to read liability insurance limits

Liability coverage limits are usually formatted in a policy as 25/50/25. This means your insurance company would pay out a maximum of the following figures for each claim:

  • $25,000 per person for bodily injuries
  • $50,000 per accident for bodily injuries
  • $25,000 per accident for property damage

How to choose the right liability car insurance

Things to consider when determining the right liability car insurance include:

  • Check state minimums to ensure you comply with the requirements.
  • Verify your vehicle’s actual cash value (ACV) to determine if liability insurance or full coverage is best. Kelley Blue Book (KBB) and NADA can help you find its value.
  • Determine how much coverage you need to protect your finances.
  • Compare car insurance quotes from at least three insurance companies to find the best deal for your coverage needs.

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Liability Car Insurance FAQs

Here are answers to some of the most common questions about liability car insurance.

Do you need liability car insurance?

You need liability car insurance in 48 states and the District of Columbia, but New Hampshire and Virginia allow you to prove financial responsibility instead of buying liability coverage. But even in these two states, you must purchase liability insurance if you can’t meet the state’s minimum requirements.

What’s the difference between full coverage and liability insurance?

Liability insurance only covers property damage and bodily harm you cause to others. Full coverage includes liability insurance, plus coverage for your own vehicle and injuries. It can also include coverage if someone hits you without insurance or doesn’t have enough liability coverage to pay for your injuries or property damage.

How much liability insurance should you get?

You should get enough liability insurance to protect yourself financially. Your liability limits should be at least as much as your net worth, or your assets minus your debts. Having enough coverage in place can help you avoid being held personally responsible for injuries or damage you cause.

Is liability car insurance a scam?

No. Liability car insurance isn’t a scam, which is why nearly all states mandate it. Auto liability coverage provides financial protection for accidents you cause.

Without liability auto insurance, you would be financially responsible for any injuries and property damage you cause while driving.

How does liability insurance from a rental car company work?

Rental car companies offer liability insurance for drivers who don’t have their own auto liability coverage. It can cover injuries or property damage you cause in an at-fault accident while driving a rental. If you have liability insurance on your own policy, you might not need the coverage the rental car company offers.


  1. U.S. Department of State, “Vehicle Liability Insurance Requirements,” accessed November 20, 2023.
  2. New Hampshire Insurance Department, “2022 Automobile Insurance Consumer Frequently Asked Questions,” accessed November 20, 2023.
  3. Virginia Department of Motor Vehicles, “Financial Responsibility Requirements,” accessed November 20, 2023.


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