What is liability insurance coverage?

Overview: Liability insurance is a vital component of car insurance, usually required in most states to provide financial protection if you’re responsible for an accident that causes injury or property damage to others. It includes Bodily Injury (BI) liability, which covers others’ medical expenses, and Property Damage (PD) liability, which pays for repairs to others’ property. While states set minimum required coverage, damages can exceed these limits even in less severe accidents, making it essential for drivers to understand and consider adequate liability coverage to ensure financial security.

What is liability insurance coverage?

Liability insurance coverage helps protect you financially if you're deemed responsible for causing an accident that injures another person or damages their property. Since this insurance primarily focuses on covering the costs incurred by others due to your actions, it does not pay for your own vehicle repairs or medical bills.

It may also cover legal fees if the injured party sues you, but not always. However, it’s important to remember that liability insurance does not cover your own injuries or damages to your vehicle—additional coverages like Collision or Medical Payments insurance would be required for that.

What does liability insurance cover?

There are two main components of liability insurance: Bodily Injury (BI) liability and Property Damage (PD) liability. Here's what they cover:

Let's take a deeper dive into each component.

• BI coverage may include:
  • Hospital or doctor bills.
  • Ongoing physical therapy costs.
  • Compensation for lost income when the injured party can’t work.
  • Pain and suffering damages. 
  • Funeral expenses if the accident results in a fatality.

Example: Let’s say you run a red light and hit another car. The other driver suffers injuries requiring weeks of treatment and rehabilitation. Your BI coverage would help pay their medical bills and lost wages.

• PD coverage may include:
  • Repairs for the other driver’s damaged vehicle.
  • Replacing a totaled car if repair isn’t possible. 
  • Fixing damage to stationary property like a fence or storefront.

Example: If you rear-end someone at a stoplight and crack their bumper, your PD liability coverage would help pay the costs associated with fixing their car.

Coverage limits explained

Liability insurance coverage comes with limits—the maximum amount your insurer will pay for damages in the event of a claim. In most states, there are mandatory minimum limits broken into three amounts (e.g., $25,000/$50,000/$20,000). These represent:

• Maximum payout for bodily injury per person.
• Maximum total payout for bodily injury per accident.
• Maximum payout for property damage per accident.

While state-mandated limits ensure you meet minimum legal requirements, even a less severe accident can result in damages that exceed those limits. For added security, many drivers choose higher limits.

Why is liability insurance important?

Liability insurance is not just beneficial, it’s essential. Here are some reasons why every driver needs it:

• It’s legally required. In most states, driving without liability insurance is illegal. Failing to meet the minimum requirements can lead to fines or license suspensions.   
• It safeguards your finances. Accidents can lead to overwhelming expenses—medical bills, vehicle repairs or lawsuits can cost thousands of dollars. Without liability coverage, you’d be responsible for paying these costs out of pocket, potentially jeopardizing your financial stability. 
• State requirements may be insufficient. The minimum coverage required by law might not fully cover the expenses of a serious crash. For instance, if your liability insurance limit is $25,000 but the crash results in $50,000 in damages, you could be personally liable for the remaining $25,000.

Understanding what liability insurance doesn't cover

While liability insurance is designed to protect others, it indirectly protects you too, especially your financial future. However, it’s equally crucial to remember what it doesn’t cover. For damages to your own vehicle or injuries you could sustain, consider adding coverages such as:

• Collision insurance — to help repair or replace your car after a crash.
• Comprehensive insurance — to cover non-collision damages like theft or weather-related damage. 
• Medical Payments coverage/Personal Injury Protection (PIP) — to pay for your medical expenses if you're injured in an accident.

By combining the right mix of liability insurance with other coverages, you can help ensure that you're protected on the road.

Liability insurance for your needs

To ensure you have the proper protection, speak with an insurance agent who can help you assess your situation and discuss coverage options with you. They’ll help you assess your personal needs to determine whether state minimum requirements are sufficient or if higher limits would help better protect your assets and financial security. Ensure you're equipped for the unexpected and take the first step toward financial confidence today.

For more insights and assistance, contact a State Farm agent or get a free, no-obligation quote online. Drive smart, stay safe and protect what matters!