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Auto liability insurance explained

By Posted : 12/31/2015

Even the best driver can cause an accident, and even the most careful person can be unlucky. That's why drivers in the U.S. are required to prove they can afford to pay for their mistakes if someone or something is hurt. Liability car insurance is a type of car insurance that provides the most limited amount of coverage.

In most cases, this is accomplished by purchasing at least a mandatory minimum amount of automobile liability insurance coverage. Driving without insurance, sometimes referred to as "going naked," is not advised.

This resource will answer your important questions about liability insurance.

What does auto liability insurance cover?
Liability car insurance coverage limits
State minimum auto liability requirements
Cost of liability car insurance

How much auto liability insurance should you buy?
Penalties for driving without liability insurance
Shopping for liability car insurance
Auto liability insurance frequently asked questions (FAQs)

What does auto liability insurance cover?

Auto liability insurance covers the damage to other vehicles and injuries to other people that result from an accident caused by the insured individual.

There are two kinds of liability coverage:

1.      Bodily injury coverage

Bodily injury liability, which covers medical costs, funeral expenses, lost income and pain and suffering of people injured by you.

2.      Property damage coverage

Property liability, which reimburses accident victims for the repair or replacement of belongings damaged by you. This covers both someone else’s car or property; for instance, if you hit a sign or house.

Both types of liability insurance cover you only up to your limits, and that is why it’s important to make sure you buy enough coverage for the protection you need. Use our coverage calculator to find a recommended liability coverage level.

Auto insurance coverage calculator>

Your insurer is obligated to defend you if you are sued following a motor vehicle accident.

What does auto liability insurance cover?

Liability insurance does not cover damage to your own vehicle if you are at-fault in an accident, you need collision and comprehensive coverage to pay for those damages. Nor does liability insurance reimburse you for medical expenses if you are at-fault in an accident, your personal health insurance plan may be able to cover unreimbursed medical costs. It also does not cover claims that exceed the limits of your coverage, and it may not extend to legal defense exceeding your policy limits. Higher liability limits can help you to avoid paying out-of-pocket when damages exceed minimum limits, and an umbrella policy can offer limits of $1 million or more once your auto insurance limits are reached.

Liability car insurance coverage limits

States set their own minimum liability coverage requirements for property damage and bodily injuries. Requirements are usually expressed as a group of numbers. For example, California's requirements are 15/30/5. This means that in California, you must purchase a policy that provides at least:

·         $15,000 of bodily injury coverage per person injured in an accident caused by you.

·         With a maximum of $30,000 for everyone injured in that accident.

·         In addition, you must carry insurance covering at least $5,000 of property damage.

State minimum auto liability requirements

The list below indicates liability insurance minimums for every state. As of 2015 there are 12 "no-fault" states that require all drivers to carry personal injury protection (PIP) to pay for their medical expenses if involved in an accident. A few states, such as Maine and New Hampshire, require medical payments (MedPay), which also gives you some medical coverage if your or your passengers are injured in an auto accident.

Many states require you to carry uninsured motorist bodily injury (UM) or underinsured/underinsured motorist (UIM) coverage. Some states require uninsured motorist property damage (UMPD).

While most but not all states require drivers to carry auto insurance – Iowa and New Hampshire are exceptions – all states do have financial responsibility laws requiring that drivers are able to pay for damages caused to others.

Florida is a special state. One law on the books indicates that purchasing bodily injury liability coverage is optional. However, under a different financial responsibility law, drivers could be penalized if they don’t carry bodily injury coverage and are responsible for injuries they cause in an auto accident. To be safe, consider carrying at least the minimum limits listed below.

State Minimum liability coverage limits Other types of insurance required (if any)

* Florida doesn't require bodily injury liability coverage, but many insurers only offer policies with at least minimum amounts of 10/20 of BI coverage.

** In New Hampshire auto insurance isn't mandatory, but if you choose to buy insurance these are the minimum amounts.

*** Rhode Island doesn't require drivers to buy UM/UIM coverage if buying minimum liabiity coverage. If buy higher liability limits, UM is required.

Alabama 25/50/25
Alaska 50/100/25
Arizona 15/30/10
Arkansas 25/50/25
California 15/30/5
Colorado 25/50/15
Connecticut 20/40/10 UM/UIM
Delaware 15/30/10 PIP
District of Columbia 25/50/10 UM, UMPD
Florida* 0/0/10 PIP
Georgia 25/50/25
Hawaii 20/40/10 PIP
Idaho 20/50/15
Illinois 25/50/20 UM
Indiana 25/50/10
Iowa 20/40/15
Kansas 25/50/10 UM/UIM, PIP
Kentucky 25/50/10 PIP
Louisiana 15/30/25
Maine 50/100/25 UM/UIM, MedPay
Maryland 30/60/15 UM/UIM, UMPD, PIP
Massachusetts 20/40/5 UM/UIM, PIP
Michigan 20/40/10 PIP, property protection
Minnesota 30/60/10 UM/UIM, PIP
Mississippi 25/50/25
Missouri 25/50/10 UM
Montana 25/50/10
Nebraska 25/50/25 UM/UIM
Nevada 15/30/10
New Hampshire** 25/50/25 UM/UIM, MedPay
New Jersey 15/30/5 UM/UIM, UMPD, PIP
New Mexico 25/50/10
New York 25/50/10 UM, PIP
North Carolina 30/60/25 UM, UMPD
North Dakota 25/50/25 UM/UIM, PIP
Ohio 25/50/25
Oklahoma 25/50/25
Oregon 25/50/20 UM, PIP
Pennsylvania 15/30/5 PIP - referred to as “First Party Benefits Coverage”
Rhode Island*** 25/50/25
South Carolina 25/50/25 UM, UMPD
South Dakota 25/50/25 UM/UIM
Tennessee 25/50/15
Texas 30/60/25
Utah 25/65/15 PIP
Vermont 25/50/10 UM/UIM, UMPD
Virginia 25/50/20* UM/UIM, UMPD
Washington 25/50/10
West Virginia 25/50/25 UM, UMPD
Wisconsin 25/50/10 UM
Wyoming 25/50/20


How much does auto liability insurance cost?

Depending upon where you live and what coverage limits you purchase, your annual premium for liability car insurance can vary significantly.  Insurance.com  acquired Quadrant premium data indicating  the average annual liability premium for a driver purchasing minimum coverage limits to be $723.26 in California, versus $890.72 in New York.

You may obtain the cheapest insurance rate if you buy a minimum liability policy. However, minimum coverage levels are not recommended because it can leave you financially exposed in an at-fault accident. Increasing your limits above state minimums should give you better coverage and doesn’t cost much more – averaging approximately $5.00 per  month above the cost of minimum coverage.

Find specific rates in your area from multiple carriers using our free online quote comparison tool.  Answer a few questions to compare quotes side-by-side and even purchase your policy online.

The table below illustrates premium amounts by carrier for two example states.

Average annual liability premium, 2015

California Carrier

Liability Only - CA Minimum BI/PD

Liability Only - 50/100/50 BI/PD

Company 1 $1,420.46 $1,874.80
Company 2 $673.15 $872.04
Company 3 $647.04 $845.81
Company 4 $586.50 $849.34
Company 5 $425.26 $523.59
New York Carrier

Liability Only - NY Minimum BI/PD

Liability Only - 50/100/50 BI/PD

Company 6 $1,363.05 $1,509.93
Company 7 $1,100.61 $1,211.71
Company 8 $939.75 $1,073.32
Company 9 $881.30 $984.55
Company 10 $862.41 $854.72
Company 11 $556.37 $606.85
Company 12 $531.52 $573.03

Average of Annual Premium Liability Only - State Minimum BI/PD Liability Only - 50/100/50 BI/PD
AK $426 $434
AL $637 $694
AR $616 $678
AZ $600 $696
CA $723 $911
CO $646 $725
CT $1,097 $1,278
DC $1,054 $1,139
DE $1,520 $1,553
FL $1,058 $1,372
GA $743 $804
HI $386 $422
IA $403 $451
ID $546 $601
IL $543 $602
IN $633 $691
KS $526 $581
KY $607 $663
LA $909 $1,143
MA $866 $996
MD $958 $1,023
ME $513 $519
MI $2,446 $2,145
MN $864 $868
MO $506 $576
MS $639 $701
MT $467 $502
NC $385 $426
ND $512 $527
NE $472 $508
NH $587 $629
NJ $1,086 $1,462
NM $612 $652
NV $641 $786
NY $891 $973
OH $579 $602
OK $712 $805
OR $1,007 $1,072
PA $560 $626
RI $1,026 $1,113
SC $654 $717
SD $431 $467
TN $656 $717
TX $783 $818
UT $629 $685
VA $536 $600
VT $487 $541
WA $671 $713
WI $577 $652
WV $669 $773
WY $410 $429
Overall Average $713 $780

Methodology:  Insurance.com commissioned Quadrant Information Services to gather insurance rates for a 2015 Honda Accord LX for 10 ZIP codes in each state, using six large carriers (Allstate, Farmers, GEICO, Nationwide, Progressive and State Farm). In cases where one of the selected insurers didn’t return a rate, another major carrier in the state was substituted.

Averages are based on insurance for single men and women age 18 to 85 who commute 12 miles to work each day. Rates were calculated for several policy limits:

  • Liability and other state required coverage – the state minimum for bodily injury liability and property damage liability, with other required coverages included if mandated by the state

  • Limits of 50/100/50 --  $50,000 for injury liability for one person, $100,000 for all injuries and $50,000 for property damage in an accident, along with any other state required coverages. 

How much auto liability insurance should you buy?

Most experts agree that the legally-mandated minimum coverage is not enough for many drivers. The amount of coverage you should purchase depends on your assets and your tolerance for risk.

Use our auto insurance coverage calculator to find out what coverage limits best fit your needs.

If you cause an accident that seriously injures the other party, medical bills, income loss, and pain and suffering claims could come to hundreds of thousands of dollars. If you have assets above the limits of your policy, the victim's attorney is likely to pursue them. In addition, many insurance policies allow insurers to limit their legal defense expense to your coverage limit.

Drivers without home equity, savings or other assets

If you have little savings (outside of retirement accounts which are protected) and no home equity or other valuable assets, the state-mandated coverage may be enough. However, in states with very low minimums, the minimum is probably insufficient.

Penny Gusner, consumer analyst, Insure.com, recommends that you buy at least $50,000 in property damage liability. Gusner also recommends that drivers buy at least $100,000 of bodily injury insurance per person, and $300,000 per accident. How much is liability insurance with this extra coverage? Fortunately, the minimum policy is the most expensive. It only costs about 20 percent more to purchase $300,000 of coverage than it does to purchase $100,000.

Drivers with significant assets

If you have accumulated more extensive holdings, like real estate, investments and expensive collections, your coverage should probably be broader, such as 250/500/100 ($250,000 bodily injury/$500,000 BI for all involved in an accident/$100,000 property damage), or higher if your insure offers greater limits.

Personal finance gurus routinely recommend that your liability coverage should be at least as high as your net worth. If you're a top earner or have obvious wealth, your financial position could make you a target for lawsuits. For that reason, you might want to consider an umbrella policy, which kicks in when your homeowners or auto liability coverage is exhausted. Umbrella coverage is surprisingly inexpensive for the amount of coverage you can purchase ($1 million of coverage costs a few hundred dollars per year).

Penalties for driving without liability insurance

According to the latest Insurance Research Council (IRC), 29.7 million U.S. car owners do not carry legally-required auto insurance. Driving without insurance could save money in the short run, but it can result in serious penalties.

In most states, if you cause an accident, you will be forced to cover the resulting damages. This may drain your savings, and it is possible that a lien could be placed on your home and other assets. Up to 25 percent of your future wages could be garnished.

The Insurance Information Institute (III) reports that in 2014, the average auto liability claim for bodily injury was $16,640 while the average cost for property damage was $3,290. Without insurance, you'd have to cover this out-of-pocket. If you're taken to court and lose, you could be forced to pay for your victim's legal fees as well as your own. And you'd still have to repair or replace your own car.

If you don't cause an accident but are pulled over and caught driving without insurance, you may face:

•    Driver's license suspension
•    Registration suspension
•    Fines ranging from $600 to $5,000
•    Additional lapse fees due to your DMV
•    Vehicle impoundment
•    Jail time or community service
•    Points on your license
•    A requirement to carry SR-22 insurance

By driving without insurance, you're gambling with your future.

Shopping for liability car insurance

It can be smart to review your policy once a year or so and make sure that your assets and income are fully protected. Even if you don't need to increase or decrease your auto liability insurance, it’s useful to compare auto insurance quotes to make sure that you're getting a good deal. Make sure the quotes you receive all include the same coverage so that you can make a valid comparison.

When you have a life-changing event during the year – such as adding a teen driver, marriage, divorce, moving, adding or removing a vehicle – it’s particularly important to comparison shop.  Your current insurance company may not have the cheapest rates and you could miss out on saving hundreds, or even thousands, of dollars each year by not taking 20 minutes or more to shop around.

Auto Liability FAQs

I don't own a car but I have a driver's license. Am I required to buy liability insurance?

No. Presumably, the car owner's insurance would cover you if you cause an accident. Non-owner car insurance is a great option if you don’t own a car. However, even if the law doesn't require you to purchase insurance, you might want more coverage than the car's owner has. Purchasing a non-owner policy protects you if the car owner's policy doesn't offer enough protection.

However, if you live in a household where you frequently borrow a car, or drive a friend’s car regularly, you should be added to the owner’s policy as a driver. You don’t have to own the car to be added to the policy as a driver.

Does my policy protect me outside the United States?

Not unless you're driving in Canada. Driving in Mexico or other countries requires international insurance. Some insurers offer “border insurance” you can purchase if you are planning a trip into Mexico.

Are legal fees included in the policy limits?

No. The coverage for bodily injury and property damage is separate from the legal defense fees.

The bottom line is that without auto liability insurance, you are gambling in a very high stakes game. Insurance.com enables you to quickly research competitive auto insurance quotes by completing a brief form. Take a minute to explore insurance options that meet your needs.  Start now!

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