How does motor vehicle liability work?

When it comes to auto insurance coverage, liability coverage is the foundation of your policy. If you cause an accident, liability insurance usually pays for the damages and injuries suffered by the other party. Most states require drivers to have at least a minimum amount of liability coverage, although the amounts of liability insurance required are generally low and may not provide sufficient protection.

As one of the most important types of auto insurance coverage, having the right amount of liability coverage is important. If you don’t have enough, you could be liable for significant expenses if you cause an accident and the damage exceeds your insurance limits. Bankrate has looked at the average cost of different liability limits to help you estimate the amount of liability cover you need.

How much auto liability insurance do you need?

You’ll need to buy at least your state’s minimum liability limits to drive legally in most states, but is that enough? Although lower limits generally mean a lower premium, buying state minimum limits can expose you more financially. If you cause an accident, your insurance will only pay up to the amounts in your policy. Lower limits are used up faster, potentially leaving you with a refundable fee.

Fortunately, it doesn’t cost much to buy more liability coverage from insurance companies, according to Bankrate’s analysis of different liability limits and their impact on auto premiums. The table below shows the average cost of purchasing liability coverage above the state minimum amounts. The level of responsibility is presented in three digits, separated by a slash. These figures correspond to the amount of coverage for:

bodily injury per person / bodily injury per accident / property damage

You can see the premium difference for purchasing different levels of liability coverage. Each of the premiums below is for a full coverage policy with $500 full and collision deductibles. Liability limits range from state minimum coverage up to 250/500/100.

The rates include respectively the civil liability for bodily injury per person and per accident, and the civil liability for material damage. PIP and Uninsured/Underinsured Motorist coverage is applied for states that require it.

Although higher limits cost more, you get much greater financial protection by reducing the risk of paying out-of-pocket expenses in the event of an at-fault accident. Buying liability insurance is a bit of a balancing act. You need to make sure you stick to your budget so you don’t stress your monthly finances, but you want to feel comfortable with your level of coverage if you cause an accident. If you’re not sure how much coverage to buy, you may want to get quotes for different levels and discuss your options with a licensed insurance agent.

What damage is covered by motor vehicle liability insurance?

Due to the nature of accidents, you probably never intend to cause one. But car accidents happen, and when they do, you probably want to know your finances are protected. Even minor accidents can result in hundreds or thousands of dollars in repair bills, and medical expenses can add up even faster. Liability insurance can help protect you from financial devastation by saving you from paying large fees.

Types of Liability Coverage

Liability coverage has a few parts. Personal injury liability pays for injuries you cause to the other party and is generally divided into two parts, “per person” and “per accident”. The per person portion pays up to your coverage amount for injuries you cause to each person in an accident, excluding passengers in your vehicle, and the per accident portion sets a cap on the total amount your insurance will pay for medical expenses. Liability coverage also includes Property Damage Liability, which pays for damage you cause to the other party’s vehicle, as well as damage you cause to objects such as fences, buildings and personal property.

Coverage for uninsured and underinsured motorists

Keep in mind that liability insurance only covers the other party’s damages, not yours. However, uninsured and underinsured motorist coverage options are structured similarly to liability, but pay your damages if someone hits you and doesn’t have insurance or enough insurance to cover your expenses. Essentially, you’re buying coverage for drivers who don’t. In some states, one or both of these types of coverage are required.

How does auto liability work in no-fault states?

Contrary to the name, there is always a flaw in flawless states. To understand how and why, we need to talk a bit about how no-fault insurance works.

No-fault states generally require drivers to wear personal injury protection (PIP). PIP primarily covers medical costs for you and your passengers and pays regardless of fault. It also covers lost wages and the cost of household expenses if you cannot afford them due to injury sustained in a car accident. The PIP does not cover property damage, this is where some confusion arises. Even in no-fault states, liable parties are still liable for property damage they cause.

Also, even though PIP is the first coverage to pay for your injuries, that doesn’t mean fault won’t be determined. Most no-fault states still require drivers to take responsibility for bodily injury. Once fault is determined, the liable party’s bodily injury liability coverage could begin to pay for your injuries, even if PIP paid first.

These 12 states currently have no-fault laws in place:

  • Florida
  • Hawaii
  • Kansas
  • Kentucky
  • Massachusetts
  • Michigan
  • Minnesota
  • New Jersey
  • New York
  • North Dakota
  • Pennsylvania
  • Utah

Other Factors to Consider When Buying Auto Insurance

Although your level of liability is a significant part of your auto insurance premium, it’s not the only factor to consider. If you choose full coverage, your deductible level will also affect how much you pay for coverage. If you have a loan on your vehicle, you will likely need to purchase comprehensive coverage. And if you lease your car, you may even need to purchase a certain amount of liability coverage – often 100/300/50 – as part of the lease agreement.

Your coverage levels may also depend on the value of your assets. As a general rule, the more assets you have to protect, the more coverage you are likely to need. Even without significant wealth to protect, your liability coverage can help you avoid financial ruin if you cause an accident. Purchasing appropriate coverage limits could help you manage your budget and overall financial health.

Finally, you may want to change your liability limits when you encounter life events, like adding a teenage driver to your policy or buying a house. For example, since teen drivers tend to have more accidents, higher liability limits could protect you from out-of-pocket costs if your teen causes an accident. Owning a home means you have more assets to protect. When you’re going through life-changing events, it may be a good idea to talk to an insurance agent about potential changes to your policy.


Bankrate uses Quadrant Information Services to analyze 2022 rates for all zip codes and carriers in all 50 states and Washington, D.C. Rates shown are based on a 40-year-old male and female with a clean driving record, good credit and the following complete information coverage limits:

  • $500 collision deductible
  • $500 aggregate deductible

Bodily injury civil liability: Rates were calculated by evaluating our base profile with the following limits applied: state minimum, 50/100, 100/300 and 250/300.

Material damage liability: Rates were calculated by evaluating our base profile with the following limits applied: state minimum, $50,000 and $100,000.

Uninsured/Underinsured Motorist Coverage: Rates were calculated by evaluating our base profile with the following coverage amounts applied: state minimum, 50/100, 100/300 and 250/500.

Personal Injury Protection: Rates were calculated by evaluating our base profile with state minimums applied.

To determine minimum coverage limits, Bankrate has used a minimum coverage that meets each state’s requirements. Our basic profile drivers own a 2020 Toyota Camry, commute five days a week, and drive 12,000 miles a year.

These are sampling rates and should only be used for comparison purposes.