Auto liability insurance covers injuries and damage to others caused by you or someone else with permission to drive your car. It does not cover your own injuries or damage to your own vehicle or property.

Because auto liability insurance is designed to protect others, it is required by law. Only in Virginia, New Hampshire, and rural Alaska may drivers opt to not carry liability insurance. Your liability insurance policy is divided into two parts, each of which carries its own required state minimums. If an accident is your fault:

• Bodily injury liability pays the medical bills and costs incurred by other people.

• Property damage liability pays for damage done to other people’s property.

Is liability car insurance mandatory?

Yes, liability car insurance is required in every state except Virginia, where drivers can opt to pay a $500 annual fee instead, and New Hampshire, where drivers can self-insure by showing cash deposits that meet the liability coverage limits. Uninsured motorists are still legally liable for accidents they cause, however.

In most states if you fail to maintain required coverage, you could face fines, suspension of your license and car registration, and even jail time. You’ll also face much steeper insurance rates in the future.

How much liability insurance do I need?

The amount of liability insurance you need depends on:

• The minimum coverage requirements of your state.

• Your net worth, or how much you could lose in a lawsuit if you were found at fault in a car accident.

Insurance will pay up to the coverage limit you have purchased. After that, any injured parties could sue you personally to recoup their losses. This is a factor when considering how much car insurance you need. Ultimately, the best amount of liability coverage to have is an amount equal to any of your assets that could be seized in a lawsuit.

Car insurance requirements vary by state. States set the minimum required coverage amount on liability policies. These minimum limits range from $10,000 to $50,000 in bodily injury liability coverage per person; $20,000 to $100,000 in bodily injury coverage per accident; and $5,000 to $25,000 in property damage liability coverage per accident.

The most common minimum liability limits required by states are $25,000, $50,000 and $25,000, respectively. This is written as 25/50/25 in policies.

However, experts generally recommend that drivers carry higher limits of at least $100,000, $300,000, and $100,000, respectively, written as 100/300/100. After an accident, insurance pays only to the coverage limit, and you may be held personally responsible to cover damage for any amount beyond that.

Full coverage vs liability-only insurance

Full coverage is not the same thing as comprehensive coverage, although the two are often confused. If you have comprehensive and liability but not collision, for example, then you do not have full coverage.

A full coverage car insurance policy is when a driver has all three major types of coverage. These are:

• Liability auto insurance, which pays for other people’s injuries and property damage and is required.

• Collision auto insurance, which covers damage to your own car caused by a traffic accident and may be optional.

• Comprehensive auto insurance, which covers damage to your own car caused by a non-traffic event, like hail or theft, and also may be optional.

FAQs

How much cheaper is liability vs. full coverage?

On average, liability insurance alone costs about half as much as full coverage.

The average cost of liability auto insurance alone nationally was $631 per year in 2020, according to the National Association of Insurance Commissioners. Insurance costs vary greatly from state to state — from an average of $979 a year in Louisiana to $304 a year in North Dakota — but also from car to car and driver to driver. In general, the greater the risk that you will cause an accident, the more you will pay for liability insurance.

Meanwhile, the average cost of full auto coverage nationally was $1,176 the same year, or nearly twice the $631 annual cost of liability alone. That’s because full coverage included comprehensive coverage, which averaged $174 per year, and collision coverage, which averaged $371.

Is it smart to just have liability insurance?

If your vehicle is fully paid off, you could carry liability insurance only and save on your premiums. This might make sense if your car is old, damaged, or has a low Blue Book value for any reason.

A good rule of thumb is if you could not comfortably afford to pay to replace your car, then you should buy collision and comprehensive coverage. Some experts say that if your annual premium reaches 10 percent of the car’s value, consider dropping full coverage.

Is there a deductible for liability car insurance?

There is no deductible for liability insurance. The insurance company determines your rate based on your driving record and other factors that statistically affect the likelihood that you’ll file a claim, including your:

• age

• gender

• ZIP code

• car model

• annual mileage

While there isn’t an option to reduce your premium by choosing a deductible like you can with comprehensive and collision insurance, you may be able to reduce your premium by opting for lower levels of coverage. This could be a good option if you do not have much cash or other assets.

But always keep in mind the potential consequences if you are at fault in a serious accident, and the peace of mind that comes with maintaining adequate car insurance coverage.