Understanding Liability Car Insurance
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You may want to consider adding additional coverage types to your policy for broader protectionOwning an old car can save you a lot of money if it’s paid off. You won’t have car payments, and insurance for older cars is much cheaper than for new ones.
If your car isn’t worth much, there’s another way to save more money: Buy only liability insurance. It’s about half the cost of a full-coverage auto insurance policy.
Liability-only car insurance is the cheapest kind of auto insurance available. It doesn’t cover the value of your car, which isn’t worth much anyway, but it protects you if you cause an accident and someone else needs medical care or their car is damaged.
Related: Car Insurance Calculator
In this article
What is liability insurance?
Liability insurance pays other people in a car accident for bodily injury and property damage if you’re at fault. It can include the driver and passenger of the other cars involved, along with injured pedestrians and the owner of the property where the accident happened.
Property damage liability coverage pays for repairs to the other vehicle or the totaled car's value. It also pays to fix damaged landscaping, buildings, and other structures.
If you injure someone in an auto accident, their medical care can get expensive. Enough bodily injury liability coverage can help provide medical payment coverage for care, hospital stays, rehabilitation, and long-term care.
Without this type of insurance, you could be liable for the total damages. A home may be damaged, or someone could have long-term medical expenses. Without insurance, the injured party could sue you in court to have your wages garnished or personal assets sold.
If you own a home or have savings, you may want enough liability insurance to cover those potential losses.
Even with liability insurance, you’re responsible for paying for damages above your car insurance policy limit.
Now, the kicker is that it doesn’t compensate you or your passengers for medical bills or repair your car. It's a gamble you would be taking.
Inclusions and Exclusions
Liability car insurance covers damages and injuries you cause to others in an accident but does not cover damages to your own vehicle or injuries you sustain. Here's a breakdown:
Inclusions
- Bodily injury liability. Pays for medical expenses, lost wages, and legal fees for others injured or killed in an accident you caused.
- Property damage liability. Covers the cost of repairing or replacing property (like vehicles, buildings, or structures) you damage in an accident.
Exclusions
- Damage to your own vehicle. Liability insurance does not cover the cost of repairing or replacing your own vehicle if it's damaged in an accident you cause. For that, you would need collision coverage.
- Your medical expenses. Liability insurance does not cover your medical expenses if you're injured in an accident you cause. You would need personal injury protection (PIP) or medical payment coverage.
- Theft, vandalism, or natural disasters. Liability insurance does not cover damage to your vehicle from theft, vandalism, or natural disasters. Comprehensive coverage is needed for such incidents.
- Uninsured/Underinsured motorist coverage. Liability insurance does not protect you if you're in an accident caused by a driver who doesn't have insurance or enough insurance to cover your damages. For that, you would need uninsured/underinsured motorist coverage.
- Additional extras. Liability insurance typically doesn't include extras like roadside assistance, rental car reimbursement, or custom parts and equipment coverage. You would need to add these as optional coverages to your policy.
In summary, liability insurance covers damages you cause to others, including their medical expenses and property damage, but it doesn't cover your own vehicle or injuries. For broader protection, you may want to consider adding additional coverage types to your policy.
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Liability insurance rates
Before we get to rates, it’s important to understand the minimum limits of liability car insurance coverage needed per state and how much you’ll need in relation to your financial circumstances.
How to read coverage amounts
Liability policies are usually listed as a ratio. Per each accident, a 100/200/50 policy would cover:
- Up to $100,000 for the injury of one person.
- Up to $200,000 for the injuries of multiple people.
- Up to $50,000 for property damage.
Those aren’t the minimum coverage amounts but are examples of what a driver may want.
Minimum amounts
Minimum liability coverage amounts vary by state. States typically require only $20,000 to $30,000 for bodily injury to one person, $50,000 for all others hurt in the same accident, and up to $25,000 for property damage.
Depending on your assets, you may want to buy more liability than the state minimum required. If the policyholder doesn’t have enough coverage, then you could be sued in court to pay the test of the medical, property, and auto damage bills.
You should determine your net worth before deciding how little liability insurance you need. Even at age 30 or so, you may have more assets than you realize, especially if you own a home or have a retirement account. Those are in jeopardy should you be sued to your at-fault accident.
State requirements
Liability-only car insurance is the legal minimum amount of car insurance needed to drive a car legally in 22 states.
In 28 other states and Washington, D.C., drivers must also have one or both of the following:
- Personal injury protection/medical payments. This policy covers your medical bills and those of your passengers, regardless of who is at fault.
- Uninsured motorist coverage. If the other driver is at fault but doesn’t have liability coverage, this coverage pays for your medical and car repair bills.
New Hampshire and Virginia are different
Of the 50 states, New Hampshire is the only one not to require drivers to have liability insurance. In fact, car insurance isn’t mandatory there. Drivers who cause accidents must pay for the damage themselves, meaning they either buy auto insurance or cover the costs themselves.
It’s legally optional in New Hampshire, but if purchased, the minimum requirements are 25/50/25, meaning $25,000 per injured person, $50,000 per accident in bodily injury coverage, and $25,000 for property damage.
Virginia is another odd duck. Instead of its minimum 25/50/20 coverage in liability insurance, drivers can pay the state $500 to drive uninsured. You’ll still be financially responsible for all bodily injuries and property damage that you cause.
Average rates
Here’s the best part: Liability-only insurance is probably the cheapest insurance you’ll find.
Liability insurance covers bodily injury and property damage, as we’ve explained. If your state requires it, extra medical coverage, personal injury protection, or PIP, can be added. Some states may also require uninsured/underinsured motorist insurance.
Save $1,604 (or more) per year on car insurance today.
- 2-minute quote
- State minimum coverage
- Full coverage
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Keeping costs down
Insurance rates are based on many factors, so it can pay to shop for the best price and coverage.
Some things that can lower the cost of liability-only insurance, or any auto insurance, for that matter, include:
- Owning an older car
- Owning a smaller car
- Being at least 25, when rates start dropping
- Having good driving history
- Having a good credit score
- Being married
- Being female
- How much you drive
- Where you live
- Having a low deductible
- Bundling with home insurance
Liability insurance companies
Shopping for auto insurance is something consumers should do every year when their policy comes up for renewal. It can be an easy way to save hundreds of dollars.
When shopping for liability-only insurance, make sure you’re meeting your state’s minimum requirements. Depending on your assets, you may want more coverage. And make sure it’s for personal use since some companies focus on business clients.
Here are four liability insurance companies that are worth checking out:
State Farm
State Farm sells many types of coverage for auto insurance, including liability-only insurance.
One of its top features is that it has local insurance agents, meaning you can work with an agent in person for all your insurance needs. If you’re looking to bundle your insurance, State Farm can be a good choice with the many types of insurance it sells.
State Farm has some of the lowest average insurance rates for most demographics, according to U.S. News & World Report.
State Farm has been in business since 1922 and currently has more than 58,000 employees and more than 19,000 independent contractor agents servicing 83 million policies and accounts in the U.S.
USAA
For U.S. military members, the insurance company USAA is known for offering inexpensive insurance.
It sells liability-only auto insurance and is known for having relatively low premiums and offering high-risk auto insurance.
USAA received the highest ranking of car insurance companies by U.S. News & World Report. Much of that was due to high customer satisfaction, such as when filing a claim.
Geico
Geico sells liability-only auto insurance, and it recommends having the same level of bodily injury coverage for all your cars so that your personal assets aren’t jeopardized.
Geico finished second behind USAA in the U.S. News survey rating of claim response, customer service, and value. The survey found that Geico offers good value for the money and has lower-than-average rates.
Gabi
All of the above companies, and many more, offer online auto insurance quotes. An easier way maybe with an aggregator such as Gabi that shops for insurance policies for you and gives you free quotes.
It compares multiple offers from top insurance companies by pulling new car insurance quotes to match your current coverage without manual entry. You don’t have to search multiple websites.
You start by sharing your policy details with Gabi through a PDF or account credentials. It shows you the best rates, and you pick the quote you want to learn more about.
Gabi is a licensed insurance broker in all 50 states, including Washington, D.C.
Read our full review of Gabi here.
Save $1,604 (or more) per year on car insurance today.
- 2-minute quote
- State minimum coverage
- Full coverage
- Explore top brands
What about collision and comprehensive?
Before buying liability-only insurance, you should realize what you’re not getting with such a policy. Collision and comprehensive coverage are typically the two largest parts of a car insurance bill.
Here’s what they cover and what won’t be covered under a liability-only policy:
- Collision: Pays for damage to your car if you’re at fault or if no one is at fault.
- Comprehensive: Pays for damage by acts of God such as weather, animals, or vandalism.
Actual cash value of your car
One last important step in deciding if liability-only insurance is right for you is knowing your car's actual cash value or ACV. That’s how much it would cost to buy the same car today.
And we don’t mean a new car. If your car is 15 years old, don’t expect it to be replaced under your full insurance coverage with a new car and a new car price. Your car’s value has likely fallen over the years.
If your car is totaled in an accident, it costs more to repair your car than its ACV. Instead of repairing it, your insurer will give you a check for the car's ACV.
It had a high ACV when it was new, and insurers would have to spend more money to repair it before declaring it totaled.
Suppose the $20,000 car you bought years ago is worth $5,000 in ACV. If your car is damaged today, your insurance company will pay you $5,000 to repair the car, minus your deductible. The same amount applies if the car is stolen.
Comprehensive collision coverage on such a car can be fruitless because paying for that and your deductible can be worth more than the car.
Let’s say your old car is only worth $1,200, and you have a $500 deductible. Your ACV has now fallen to $700. Comprehensive and collision insurance can cost $700. Your car is now worth nothing in an insurance payout based on what you paid for the premium and deductible.
That’s a clear sign that it’s time to drop comprehensive and collision coverage and to have liability insurance only on your old car.
Pros and cons of liability car insurance
Pros
- Liability car insurance is least 50% cheaper than also having comprehensive and collision insurance.
- It covers medical and property damage costs to other drivers and their vehicle’s occupants.
Cons
- You and your car aren’t covered.
- It is illegal in almost every state to drive without it.
- You could lose your assets without it.
- If your car is totaled, you have to pay yourself to buy a new one.
Save $1,604 (or more) per year on car insurance today.
- 2-minute quote
- State minimum coverage
- Full coverage
- Explore top brands
FAQs
Does liability insurance cover my own vehicle?
No, liability insurance does not cover damage to your own vehicle. It only covers damages you cause to others.
Can I get liability insurance if I don't have my own car?
Yes, you can get non-owner liability insurance, which provides liability coverage when you're driving a car you don't own, such as a rental car or a friend's car.
Is liability insurance required?
In most states in the US, auto liability insurance is required by law. Each state sets its own minimum coverage requirements, so it's essential to check what your state mandates.
The bottom line
If your car is old and isn’t worth much, buying liability-only auto insurance can save you a fair amount of money.
That savings can be put aside to save for a new car, which you’ll likely need someday. Or better yet, buy a used car at a lower price and use that savings to pay for auto insurance.
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Writer
Aaron Crowe is a freelance journalist who specializes in personal finance writing and editing. He has worked at newspapers, where he won a Pulitzer Prize, and has written for numerous online publications. These include AOL, US News & World Report, WiseBread, Bankrate, AARP, and many websites focusing on housing, credit and insurance. He lives in California with his wife and daughter.
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