What Is Liability Car Insurance?
Liability car insurance covers injuries and property damage you cause to others when you're at fault in an accident. It's the foundation of every auto insurance policy and is legally required in nearly every state.
Liability insurance has two main components:
Bodily injury liability (BI) — Covers medical expenses, lost wages, pain and suffering, and legal fees if you injure someone in an accident.
Property damage liability (PD) — Covers repair or replacement costs for another person's vehicle, fence, building, or other property you damage.
Critical point: Liability insurance does not cover your own injuries or vehicle damage. For that, you need collision, comprehensive, and personal injury protection (PIP) or medical payments coverage.
How Liability Coverage Limits Work
Liability limits are expressed in a three-number format, such as 100/300/100. Here's what each number means:
- First number (100): Maximum your insurer will pay per person for bodily injury in a single accident ($100,000 in this example)
- Second number (300): Maximum your insurer will pay total for all bodily injuries in a single accident ($300,000 in this example)
- Third number (100): Maximum your insurer will pay for property damage in a single accident ($100,000 in this example)
For example, if you have 100/300/100 coverage and cause an accident that injures three people:
Person A has $120,000 in medical bills → Your policy pays $100,000 (the per-person limit), and you're responsible for the remaining $20,000 out of pocket.
Person B has $80,000 in bills → Your policy pays the full $80,000.
Person C has $60,000 in bills → Your policy pays the full $60,000.
Total paid: $100K + $80K + $60K = $240,000, which is under the $300,000 per-accident cap. But Person A's excess $20,000 is still your responsibility.
If damages exceed your policy limits, you can be sued personally for the difference. This is why adequate liability coverage is so important if you have assets to protect.
What Bodily Injury Liability Covers
Bodily injury liability pays for:
- Medical expenses: emergency room visits, surgery, hospitalization, rehabilitation, ongoing treatment
- Lost wages: income the injured party loses while unable to work
- Pain and suffering: compensation for physical and emotional trauma
- Loss of consortium: damages awarded to a spouse for loss of companionship
- Funeral and burial costs: if the accident results in a fatality
- Legal defense: attorney fees, court costs, and settlements if you're sued
Bodily injury claims can be extremely expensive. A serious injury requiring multiple surgeries, long-term rehabilitation, or permanent disability can easily exceed $100,000. Fatal accidents can result in wrongful death claims well into the millions.
Your liability policy also covers your legal defense even if the lawsuit is frivolous. The insurer hires attorneys, negotiates settlements, and pays judgments up to your policy limit.
What Property Damage Liability Covers
Property damage liability pays for damage you cause to:
- Other vehicles: repair or replacement costs for cars, trucks, motorcycles
- Buildings: storefronts, homes, garages you crash into
- Fences, mailboxes, landscaping, and other fixed structures
- Personal property inside another vehicle: laptops, phones, equipment
While property damage claims are typically less expensive than bodily injury claims, they can still be significant. If you total a $60,000 luxury SUV or crash into a storefront causing $80,000 in structural damage, you could quickly exceed a low property damage limit.
The average property damage liability claim in 2024 was $5,313, according to the Insurance Information Institute. But high-value vehicles and commercial property can push claims much higher.
State Minimum Requirements (And Why They're Not Enough)
Nearly every state requires drivers to carry liability insurance, but minimum requirements vary widely. Common state minimums include:
- 25/50/25 (e.g., California, Texas)
- 25/50/10 (e.g., Florida, Georgia)
- 15/30/5 (e.g., Arizona)
- 50/100/25 (e.g., Alaska, Maine)
Here's the problem: state minimums are dangerously low. A $25,000 per-person bodily injury limit can be exhausted by a single emergency room visit and a few days of hospitalization. A $10,000 property damage limit won't cover the cost of a totaled mid-range vehicle.
If you cause an accident and damages exceed your policy limits, you're personally liable for the difference. That means creditors can pursue your wages, bank accounts, home equity, and other assets.
Good news: Increasing your liability limits from state minimums to 100/300/100 often costs only $10–$30 more per month. It's one of the best insurance values you can buy.
For a complete breakdown of what each state requires, see our guide to minimum car insurance requirements by state.
How Much Liability Insurance Do You Need?
Most insurance experts and consumer advocates recommend at least 100/300/100 coverage. If you have significant assets — such as a home, substantial savings, or high income — consider higher limits:
- 250/500/100 for homeowners or high earners
- 500/500/100 or higher for very high net worth individuals
- Umbrella policy (adds $1–$5 million in liability coverage on top of your auto and home policies for $150–$300/year)
A simple rule of thumb: your liability limits should at least match your net worth. If you have $200,000 in assets (home equity, savings, retirement accounts), you need at least $200,000 in liability coverage to protect them.
Young drivers with few assets might be comfortable with state minimums temporarily, but even then, future earnings can be garnished if a judgment exceeds policy limits.
What Liability Insurance Doesn't Cover
Liability insurance only pays for damage and injuries you cause to others. It does not cover:
- Your own injuries: You need PIP, MedPay, or health insurance for that
- Your own vehicle damage: You need collision or comprehensive coverage
- Damage you cause intentionally: No insurance covers deliberate acts
- Damage while driving for Uber, Lyft, or delivery: You need commercial or rideshare coverage
- Damage to property you own or rent: Not covered under auto liability
If you're hit by an uninsured or underinsured driver, your liability coverage won't help. For that, you need uninsured/underinsured motorist coverage, which is highly recommended.
What Affects the Cost of Liability Insurance?
Liability insurance premiums vary based on:
- Coverage limits: Higher limits = higher premiums, but the cost increase is usually modest
- Driving record: Accidents and violations increase rates significantly
- Age and experience: Young and inexperienced drivers pay more
- Location: Urban areas and states with high claim costs have higher premiums
- Credit score: In most states, poor credit results in higher premiums (76% higher on average)
- Vehicle type: High-performance or expensive vehicles can increase liability premiums
- Annual mileage: More miles driven = higher risk
The average cost of liability-only insurance in 2026 is approximately $730 per year nationally, though rates vary widely by state and individual factors.
Tips for Shopping for Liability Coverage
1. Compare quotes from at least 3–5 carriers. Rates for identical liability coverage can vary by hundreds of dollars between insurers.
2. Don't just buy state minimums. Upgrade to at least 100/300/100 if you can afford it. The extra protection is worth far more than the modest premium increase.
3. Ask about discounts. Bundling auto and home insurance, maintaining a clean driving record, and taking defensive driving courses can reduce your liability premium by 20–30%.
4. Consider an umbrella policy. If you have substantial assets, a $1 million umbrella policy adds massive liability protection for $150–$300 per year — far cheaper than increasing your auto liability limits to that level.
5. Review your coverage annually. As your net worth grows, your liability limits should grow with it.
Frequently Asked Questions
Liability car insurance covers bodily injury and property damage you cause to others in an at-fault accident. It does not cover your own injuries or vehicle damage. It's required by law in nearly every state.
Bodily injury liability covers medical bills, lost wages, pain and suffering, and legal fees if you injure someone in an accident. It includes both immediate medical costs and long-term rehabilitation. If you're sued, it also pays for your legal defense.
Property damage liability covers repair or replacement costs for another person's vehicle, fence, building, or other property you damage in an at-fault accident. It does not cover your own vehicle.
Most experts recommend at least 100/300/100 coverage ($100,000 per person, $300,000 per accident for bodily injury, $100,000 for property damage). If you have significant assets like a home or substantial savings, consider higher limits like 250/500/100 or an umbrella policy.
Yes, liability insurance is required in nearly every state. Minimum requirements vary, but most states mandate at least 25/50/25 or similar limits. Only New Hampshire and Virginia don't strictly require it, but you must pay a fee or prove financial responsibility.
You can face fines, license suspension, vehicle impoundment, and personal legal liability for all damages out of pocket. You'll also have difficulty getting affordable insurance in the future, as you'll be classified as a high-risk driver.