Liability insurance gaps: What it doesn’t cover and why more protection may be needed

Overview: Liability insurance covers damage or injuries you cause to others in a crash, in the case of a covered claim or loss, but it does not pay for repairs to your own vehicle or your medical bills if you’re at fault. This article outlines the limitations of liability coverage and explains why adding options like collision, comprehensive and Medical Payments Coverage (Med Pay) or Personal Injury Protection (PIP) may be important for broader protection. Understanding what is and isn’t covered can help you choose the right auto insurance coverages to fit your needs.

Liability insurance is the foundation of most auto insurance policies. It pays for damage or injuries you cause to others in an accident where you are found at fault, in the case of a covered claim or loss. This coverage helps pay for the other person’s car repairs, medical bills and may even pay your legal fees if you are sued as a result of a covered loss. Almost every state requires drivers to carry at least a minimum amount of liability insurance to legally drive.

While liability insurance is important, it does not protect your car or pay your medical bills after an accident you cause. These gaps in coverage can lead to significant out-of-pocket expenses if you only carry liability coverage. Understanding what liability insurance does not cover can help you make better decisions about your own coverage.

Coverage gaps in liability insurance

Liability insurance is meant to help protect other people—not you. The main coverage gaps you may face with liability-only insurance are:

Let’s look closer at each of these coverage gaps and possible solutions.

Gap # 1: Damage to your own car

• What’s not covered — if you cause an accident—such as, losing control on a wet road and hitting a tree or backing into a light pole—liability insurance will not pay for your car’s repairs. Liability insurance covers damage you cause to the other party’s vehicle or property, not your own. If you hit a tree, there is no “other party” involved, so liability coverage does not apply.
• Solution — collision coverage pays for repairs to your car, or it’s actual cash value (the depreciated value at the time of the accident) if it’s totaled, no matter who is at fault. However, if another driver is at fault, their liability insurance typically covers your damages. You would use your own collision coverage if you are at fault, if the other driver is uninsured, underinsured, can’t be identified (as in a hit-and-run) or if their coverage is insufficient. Your chosen deductible will apply.
• Scenario — for example, if you accidentally back into a light pole or become the victim of a hit-and-run, collision coverage pays for your repair bill after your deductible is paid. This type of coverage is usually required if you lease or finance your vehicle, but is optional if you own it outright.

Gap #2: Damage from non-collision events

• What’s not covered — liability insurance will not pay for damages to your vehicle from non-collision incidents, such as theft, vandalism, hail, flooding, fire or hitting an animal.
• Solution — comprehensive coverage pays for covered losses not caused by a collision. A deductible may apply.
• Scenario — for example, if hail dents your parked car or a deer runs out in front of you, comprehensive insurance can help cover the repairs, after your deductible is paid. Like collision, comprehensive coverage is required by lenders for leased or financed vehicles and optional if you own your car.

Gap # 3: Medical bills for you and your passengers

• What’s not covered — liability insurance’s bodily injury coverage only pays for the injuries you cause to other people. If you are hurt in a crash where you are at fault, your own medical expenses generally are not covered by liability insurance.
• Solution — this is where Med Pay coverage or PIP comes in.
• Scenario — Med Pay helps pay medical or sometimes funeral expenses for you and others in your car, no matter who was at fault. PIP is similar, but it’s broader, often covering lost wages and extra costs. Some states require PIP, especially “no-fault” states, while Med Pay is optional in most.

Deciding how much liability coverage you need

Most states set minimum liability insurance requirements, but these minimums might not be enough to cover the full cost of a serious car accident. If your liability insurance limits are too low, you could be personally responsible for bills beyond what your policy pays.

It’s wise to review your liability limits and consider increasing them, especially if you have savings or assets to protect. Ask yourself, “How much liability do I need?” Higher limits are often just a few dollars more each month and can provide important financial protection in case of a major accident.

Building a more complete auto insurance policy

Although liability insurance is necessary and important, carrying only the legal minimum may leave you without significant protection for yourself. A well-rounded auto insurance policy usually includes:

• Liability insurance — covers damage you cause to others’ property (required in nearly all states) and injuries (required in most states).
• Collision coverage — pays to fix or replace your vehicle after a crash (often required for financed/leased vehicles).
• Comprehensive coverage — covers non-collision losses including damage from theft, weather, falling objects, fire, vandalism or animals (also often required for financed/leased vehicles).
• Med Pay/PIP — covers your own and your passengers’ medical bills after a car accident. PIP is required in many no-fault states, while Med Pay is usually optional. Coverage requirements vary by state.
• Uninsured/underinsured motorist — helps if the other driver has no liability coverage or not enough coverage.

Adding these coverages may help you avoid large bills and potentially give you greater confidence while driving. To discuss your current coverage or get advice on building a more comprehensive policy, contact your insurance agent.

By knowing where liability insurance falls short, you can make informed choices about your protection and help avoid costly coverage gaps.

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