Liability Car Insurance

Liability insurance is the part of your car insurance policy that pays the other party involved in the accident if you are at fault. It is mandatory in almost all states in the U.S. and makes up a majority of the cost of the policy.
By Ryan C.
Updated Mar 5, 2022
liability car insurance
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A car insurance policy can comprise a number of different aspects, but liability car insurance is the base of all other policies. Liability insurance is mandatory in almost all states in the U.S. and will make up the majority of the cost of the policy. This is because it is geared toward covering the most expensive costs that a car accident can incur.

You generally do not want to go for the cheapest option when considering options for liability insurance. If the option or policy that you opt for is not sufficient, you could find yourself in a disastrous financial position, with thousands of dollars worth of bills to try and pay. Having an appropriate liability car insurance policy can give you peace of mind that you will be covered no matter the cost in the event of an accident.

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What Is Liability Car Insurance and What Does It Cover?

Liability insurance is the part of your car insurance policy that pays the other party involved in the accident if you are at fault. For example, if you are in traffic, miss the brake pedal, and hit a car in front of you, the insurance company will pay for the damage you cause to the other vehicle.

If the other party sues you due to an accident, then liability insurance can also pay for the legal fees that you incur. Settlements, defense fees, and judgments are all covered by liability car insurance.

Understanding Liability Insurance Limits

When shopping for liability car insurance, it is important to know what you are looking at. What determines the amount of coverage you get in this case are the limits. Liability insurance limits are generally broken down into sections using three sets of numbers (for example, 15/30/5). Here is what they represent:

  • 15 shows the policy covers $15,000 worth of death/bodily injury for one person for one accident.

  • 30 shows the policy covers $30,000 worth of death/bodily injury for more than one person for one accident.

  • 5 shows the policy covers $5,000 worth of property damage for one accident.

What Is Not Covered by Liability Insurance?

If you are involved in an accident that is your fault, then any bodily injury or property damage sustained by you is not covered by liability car insurance. The bills associated with the damage to your car and the medical bills for any injuries sustained by you or anyone else in your car are your responsibility. Even though liability insurance will not cover these expenses, there are some car insurance policies that will, and, of course, health insurance can help pay medical bills.

Collision insurance policies exist for this very reason. They pay for any vehicle replacements or repairs after an accident. Similarly, bodily injury coverage will cover any medical charges after an accident, including hospital costs, medical procedures, ambulance fees, and any wages that might be lost as a result of injuries sustained from the accident.

How Much Liability Coverage Should You Get?

This can be a little confusing to some, but the typical advice given to those looking for liability car insurance is that they should purchase insurance that will cover the maximum they could lose in a lawsuit should they lose one in the event of an accident. Let’s explain further:

Using the numbers that we mentioned in the previous section, let’s say you went ahead and purchased a liability insurance plan that included 15/30/5. Unfortunately, you were then involved in an accident that injured a couple of people and caused $100,000 in medical bills. If you refer to the number above, you will see that you are only covered for $30,000 worth of bills for multiple people injured in an accident. That means that you will have to cover the other $70,000 yourself! Not an ideal situation to say the least.

To ensure that you do not find yourself in a situation that remotely resembles this, one option you can consider is an umbrella insurance policy. Umbrella insurance policies can provide liability coverage of up to $1 million and even more. The idea behind this is that when your normal insurance coverage limit is exhausted, the umbrella coverage kicks in and provides extra coverage. So, it can almost be considered an auxiliary liability car insurance policy. According to the Insurance Information Institute, this extra layer of protection can cost just $150 to $300 per year.

What States Do Not Require Liability Car Insurance?

At the beginning of this article, you might have noticed that almost all states in the U.S. have made liability care insurance mandatory. Here are the two states that don’t require it.

New Hampshire

Drivers in the state of New Hampshire are not obligated to purchase car insurance. They must, however, show proof that, in the event of an accident, they have enough money to pay for any bills that are incurred. This does not mean that you are saving money by not buying car insurance. We still strongly recommend that you purchase liability car insurance no matter where you live, as it is the responsible and best decision for you financially.

There are some cases that drivers in New Hampshire do have to purchase insurance, and they are:

  • You were involved in an accident that was your fault, and you didn’t have insurance. Now you are obligated to file proof of your insurance.

  • You have to purchase insurance as a condition of getting your license back if you have had to appear at a hearing.

  • You must have proof of insurance to get your license back if you have been decertified as a habitual offender.

  • You have to file for insurance for three years if you have been convicted of driving while intoxicated (DWI).


Virginia drivers have to pay a fee of $500 to forego purchasing car insurance of any kind but are still liable for any damages caused if they are involved in an accident. This is a dangerous game to play, as no matter how good the driver is, accidents happen, and you could be stuck paying for hundreds of thousands of dollars worth of damages and medical bills.

What Is the Punishment If You Have No Liability Car Insurance?

If you are found to be driving with no proof of liability coverage, there can be a number of punishments depending on the specific situation. The driver can face fines, their license can be suspended, or they can even face jail time if the offense is bad enough! These repercussions can also vary from state to state.

How Much Does Liability Insurance Cost?

Insurance providers calculate how much your liability insurance premium will be based on a number of categories. They are:

  • Claims history

  • Driver history

  • Vehicle model

  • Amount of coverage that is purchased

  • Age

  • Marital status

  • Gender

  • Occupation

  • Credit (however, this is being banned in some states)

With that being said, anyone who has shopped for car insurance knows that the quotes you receive from different car insurance companies can be double or even triple that of other providers! That is why it is crucial to understand what you are looking for with your car insurance and obtain quotes from many different providers in order to get the most value for your money possible.

Liability insurance is an essential part of driving in the U.S. and is mandatory in most places. So, understanding what it is, what it covers, and how the premiums are calculated is valuable information to know. While nobody wants to pay insurance premiums every year or month, having sufficient liability insurance can prevent a financial disaster if an accident occurs.

Find the best rate for your requirements by shopping around, and make sure to pay attention to any discounts that insurance providers might offer. You can also try out some hacks to save money on your car insurance. Most importantly, drive safe, and we hope you never have to use your liability insurance.