Liability Insurance Coverage: What Is It and What Does It Cover?

By the Mercury Team

Liability insurance is a key part of auto coverage that helps protect you financially if you’re at fault in an accident. Understanding the meaning of liability car insurance can help you make the right decisions about your policy and ensure you have the best protection in place. In this blog, we’ll explain what this type of insurance is, its coverage limits, and what it covers and doesn’t cover.

What Is Auto Liability Insurance?

Liability car insurance protects you financially if you’re found legally responsible for causing injury to another person or their property in an auto accident. Generally, liability coverage is an essential component of auto insurance that can help cover the other party’s medical expenses or auto repair bills. While there are different car insurance requirements by state, most states require drivers to carry liability coverage on their auto insurance policies.

How Does Liability Car Insurance Work?

Think of liability car insurance as your financial safety net when you’re at fault in an accident. Instead of you personally paying for someone else’s medical bills or car repairs, your insurance steps in to handle those costs (up to the limits you’ve selected).

Here’s how it works in real-life situations:

Example 1:

You accidentally bump into another car in a parking lot, leaving a dent. The other driver files a claim to repair the damage. Your property damage liability coverage would help pay for their repair costs.

Example 2:

You’re involved in a fender bender where the other driver ends up needing physical therapy. Your bodily injury liability coverage would help cover their medical expenses—so you’re not stuck with a big bill.

In both cases, your liability coverage protects you by covering them. It kicks in only if you’re found legally responsible and won’t cover your own injuries or car damage. That’s where other types of coverage, like collision protection or medical payments coverage, come into play.

What Does Liability Auto Insurance Cover?

There are two categories of damages that liability insurance covers — bodily injury liability (BI) and property damage liability (PD). Liability insurance also provides the insured person a legal defense against a lawsuit alleging bodily injury or property damage from an accident.

• Bodily injury liability — Covers damages due to injury sustained by someone that the insured person is legally obligated to pay. These damages can include medical expenses, lost wages, and legal fees, as well as pain and suffering.
• Property damage liability — Covers damages the insured person is legally obligated to pay, including repairing the other party’s vehicle and other property damage to objects such as buildings, fences, and signal lights.

Liability Insurance Coverage Limits

Unlike other auto insurance coverages — e.g., collision and comprehensive coverage — liability coverage doesn’t include an insurance deductible. The amount your insurer will pay for a liability coverage claim depends on the coverage limits you choose. Each state sets minimum coverage limits for bodily injury and property damage liability, which are generally written as three numbers, such as $25,000/50,000/15,000. Here’s what each number means:

• Bodily injury per person ($25,000) — The maximum amount the insurer will pay for a single injury.
• Bodily injury per accident ($50,000) — The maximum amount the insurer will pay per accident for all injuries.
• Bodily injury per accident ($15,000) — The maximum amount the insurer will pay per accident in property damage.

Damages from even a low-impact collision can easily exceed mandatory liability auto insurance limits, so be sure to discuss what limits make sense for you with your local insurance agent.

How Much Does Liability Insurance Cost?

Multiple factors can affect how much your liability insurance will cost, including:

• Location — Different states and regions have various insurance rates. For example, liability insurance tends to be more expensive in dense urban areas because of the higher risk of accidents.
• Driving record — If you have a history of accidents or traffic violations, you might pay more than a driver with a clean record.
• Coverage limits — If you choose a higher liability coverage limit, you’ll usually pay for a higher premium.
• Vehicle type — Your vehicle’s make, model, and year can affect your rate. For example, luxury cars tend to be more expensive to insure than economy cars.

What Does Liability Car Insurance Not Cover?

Here are some examples of what liability insurance doesn’t cover:

• Your vehicle’s repair costs — Liability insurance usually doesn’t cover the costs to repair damages to your vehicle following an accident, but collision protection does. Also, liability insurance doesn’t cover damages related to other factors, such as hail or falling objects. Comprehensive coverage handles those incidents.
• Your medical bills — Liability insurance doesn’t cover any injuries you sustain after an accident. Depending on which state you live in, you may want to add medical payments coverage or personal injury protection to your policy.

Why Buy Liability Coverage?

In most states, it’s illegal to drive without at least the minimum amount of liability insurance. This ensures that if you’re at fault in a car accident, there’s some financial means to cover the other party’s damages and injuries. Liability insurance also gives you peace of mind, knowing that your assets are protected, and you won’t be in financial ruin trying to pay for the other party’s car repairs or medical bills.

Frequently Asked Questions About Reviewing Insurance

Can I have liability insurance on a financed car?

Yes, but it’s usually not enough. Most lenders require you to carry full coverage (which includes collision and comprehensive) to protect their investment. Liability insurance alone only covers damage or injuries you cause to others, not your own car. If your vehicle is financed, check with your lender before choosing coverage.

Does liability insurance cover a car rental?

In most cases, you’ll be covered for liability-related damages you cause while driving a rental. However, it won’t cover damage to the rental vehicle itself. That usually requires additional rental car insurance or coverage through the rental company.

Does liability cover my car if someone hits me?

No, liability insurance doesn’t cover damage to your car if someone else causes the accident. In that case, their insurance should pay for your repairs. If they’re uninsured or underinsured, you’d need uninsured/underinsured motorist coverage or collision coverage on your policy to help cover your own vehicle’s damage.

What does bodily injury (BI) liability coverage do?

Bodily injury liability helps pay for another party’s medical expenses, lost wages, and legal fees if you injure someone in an accident. It’s part of your overall liability coverage and is required in most states.

What is the meaning of PD liability?

PD liability stands for property damage liability. It’s the part of your auto insurance policy that helps pay for damage you cause to someone else’s property in an accident. This could include another person’s car, a fence, a mailbox, a building, or even public property like street signs or traffic lights.

Conclusion

Car accidents can be expensive, especially if the vehicles are badly damaged, or anyone is injured. Liability insurance financially protects you if you’re found responsible for causing the accident, ensuring the other party gets compensation for any bodily injuries or property damage. If you need help determining how much liability coverage you need, talk with a Mercury agent today, and they can customize an auto insurance policy that meets your needs.

Contact us for a fast, free quote today!