Liability coverage pays for damage or injury you cause to someone else in a car accident

Liability coverage is the part of your car insurance that covers the other person's costs when you are found responsible for an accident. It does not cover your own vehicle, your own medical bills, or your own injuries. Instead, it pays the other driver's repair bills, their medical treatment, and their lost wages if they were hurt because of the crash.

Every state except New Hampshire requires you to carry some minimum amount of liability coverage before you can legally drive. The state sets the floor—the lowest amount you are allowed to carry—but you can buy more. Most people carry more than the minimum because the minimum is often too low to cover a serious accident.

Liability coverage has two parts: bodily injury liability (which covers injuries to people) and property damage liability (which covers damage to the other person's vehicle or other property). Your insurance company will list them separately on your policy, usually written as numbers like "25/50/25" or "100/300/100." The first number is bodily injury per person, the second is bodily injury per accident, and the third is property damage per accident.

Key Takeaways

  • Liability coverage pays for the other person's medical bills, vehicle repairs, and other losses when you cause an accident, but it does not cover your own costs.
  • Every state requires a minimum amount of liability coverage, but the minimum is often too low to protect your savings if you cause a serious accident.
  • Bodily injury liability covers injuries to people; property damage liability covers damage to vehicles and other property.
  • If the damages exceed your coverage limit, you can be sued personally for the difference, which is why carrying more than the minimum is common.
  • Liability coverage does not explore if you cause damage intentionally, if you are driving someone else's car without permission, or if you are using your car for commercial purposes.

How bodily injury liability works

Bodily injury liability covers medical expenses, lost wages, and pain-and-suffering damages for anyone injured in an accident you cause. This includes the other driver, their passengers, pedestrians, and cyclists. If the other person's injuries are serious—surgery, ongoing physical therapy, permanent disability—the medical bills alone can reach hundreds of thousands of dollars.

The insurance company will investigate the accident, determine whether you were at fault, and then negotiate a settlement with the injured person or their lawyer. If the injured person sues you, your insurance company will also pay for your legal defense. You do not have to hire your own lawyer; the insurer provides one.

The limit you choose (the first number in your policy limits) is the maximum the insurance company will pay for one person's injuries in a single accident. If you have a limit of $25,000 per person and one passenger's medical bills are $40,000, your insurance pays $25,000 and you are responsible for the remaining $15,000 out of your own pocket.

How property damage liability works

Property damage liability covers the cost to repair or replace the other person's vehicle, as well as damage to other property like fences, mailboxes, storefronts, or utility poles. Your insurance company will get repair estimates and pay the other person's repair shop directly, or pay the other person if they choose their own shop.

The limit you choose (the third number in your policy limits) is the maximum the insurance company will pay for all property damage in a single accident. If you hit a parked car and cause $15,000 in damage, but your property damage limit is $10,000, your insurance pays $10,000 and you owe the remaining $5,000.

Property damage liability also covers damage you cause while driving—for example, if you lose control and hit a storefront, or if you back into someone's fence. It does not cover damage to your own vehicle; that is what collision coverage is for.

When liability coverage does not explore

Your liability coverage will not pay if you cause damage intentionally. For example, if you deliberately hit another car during an argument, your insurance company can deny the claim because the damage was not accidental.

Liability coverage also does not explore if you are driving someone else's car without their permission, or if you are using your car for commercial purposes (like delivering food or packages for pay) when your policy is a personal auto policy. If you drive for a rideshare or delivery service, you need commercial or rideshare coverage, not standard liability.

Your coverage will not pay if you are driving under the influence of alcohol or drugs, though your insurance company will still defend you in court. Some states allow insurers to deny claims in DUI cases, but most require them to pay the claim and then sue you to recover the money.

What happens if damages exceed your coverage limit

If you cause an accident and the other person's damages are larger than your liability limit, you can be sued for the difference. For example, if you cause $100,000 in injuries but your bodily injury limit is $25,000, the injured person can sue you personally for the remaining $75,000. The insurance company will not pay this amount; you will have to pay it yourself, which could mean wage garnishment, a judgment against your assets, or a lien on your home.

This is why many people carry more than the state minimum. A $25,000 limit sounds like a lot until one person needs surgery and rehabilitation. An umbrella policy (also called excess liability coverage) is a separate, inexpensive policy that covers damages above your auto liability limit. It typically costs $100 to $300 per year and covers $1 million or more in additional liability.

How your insurance company determines fault

Your insurance company will not pay a liability claim unless you are found at fault for the accident. The company will investigate by reviewing the police report, interviewing witnesses, looking at photos of the damage, and sometimes hiring an accident reconstructionist. If the other driver was partly at fault, your state's rules about comparative fault will determine how much your insurance pays.

In a pure comparative fault state, your insurance pays a percentage of damages equal to the other driver's percentage of fault. If you were 40% at fault and the other driver was 60% at fault, your insurance pays 60% of their damages. In a modified comparative fault state, you can only recover damages if you were less than 50% (or sometimes 51%) at fault. In a no-fault state, each driver's own insurance pays their own damages regardless of who caused the accident, though you can still sue for serious injuries.

Liability coverage versus other types of coverage

Liability coverage is required by law, but it is only one part of a full auto insurance policy. Collision coverage pays to repair or replace your own vehicle if you hit another car or object. Comprehensive coverage pays for theft, weather, vandalism, and other non-collision damage to your vehicle. Uninsured motorist coverage protects you if you are hit by a driver who has no insurance.

If you have a car loan or lease, your lender will require you to carry collision and comprehensive coverage in addition to liability. If you own your car outright, you can choose to carry only liability, though this means you will have to pay out of pocket if your own vehicle is damaged.

Medical payments coverage (sometimes called med pay) is optional and covers your own medical bills after an accident, regardless of fault. It is separate from liability and is useful if you do not have health insurance or want to avoid a deductible on your health plan.

Frequently Asked Questions

Does liability coverage pay for my own vehicle repairs?

No. Liability coverage only pays for damage you cause to someone else's vehicle or property. To cover your own vehicle, you need collision coverage (for accidents) or comprehensive coverage (for theft, weather, or vandalism). If you are at fault in an accident, your collision coverage pays for your repairs, not your liability coverage.

What if I cause an accident but the other driver does not have insurance?

Your liability coverage will still pay for the other driver's damages, up to your limit. However, if you do not have uninsured motorist coverage and the other driver hits you, your own insurance will not pay for your vehicle unless you have collision coverage. Uninsured motorist coverage protects you in this situation.

Can my insurance company refuse to pay a liability claim?

Yes, if you were not at fault, if the damage was intentional, if you were driving without a valid license, or if you were using your vehicle for a purpose not covered by your policy (like commercial delivery). Your insurance company can also deny a claim if you did not disclose information when you bought the policy, though they must prove the information was material to their decision to insure you.

What is the difference between my liability limit and my deductible?

Your liability limit is the maximum your insurance company will pay for damages you cause to someone else. Your deductible is the amount you pay out of pocket before your insurance pays for damage to your own vehicle. Liability claims have no deductible; your insurance company pays the full amount (up to your limit) for the other person's damages.

Do I need more liability coverage than my state requires?

Most insurance professionals recommend carrying more than the minimum because serious accidents can easily exceed state minimums. A single person's medical bills from surgery and rehabilitation can reach $100,000 or more. An umbrella policy is an affordable way to add $1 million or more in coverage for $100 to $300 per year.