Car liability insurance covers damage you cause to other people and their property, but not damage to your own vehicle

Liability coverage pays for injuries and property damage when you are found legally responsible for an accident. It does not pay for your own medical bills, your own car repairs, or damage from theft, weather, or hitting an animal. Most states require you to carry liability insurance before you can legally drive, and your lender will require it if you have a loan or lease on the car.

Liability splits into two parts: bodily injury liability covers medical expenses, lost wages, and pain-and-suffering claims for people you injure; property damage liability covers repairs to the other person's vehicle, fence, building, or other property. Your policy limits — written as numbers like 25/50/25 — determine the maximum the insurance company will pay in each scenario.

Key Takeaways

  • Liability insurance pays for injuries and property damage you cause to others, not damage to your own car or body.
  • Bodily injury liability covers medical bills and lost wages for people you injure; property damage liability covers repairs to their vehicle or property.
  • Your state sets a minimum liability limit you must carry, but that minimum is often too low to protect your personal assets if you cause a serious accident.
  • If you cause an accident and your liability limits are exhausted, the injured person can sue you personally for the remaining costs.
  • Liability does not cover your own injuries, your own vehicle damage, or damage from weather, theft, or hitting an animal — you need separate coverage for those.

How liability limits work and what the numbers mean

Liability limits are written as three numbers separated by slashes, such as 25/50/25. The first number is your bodily injury limit per person, the second is your total bodily injury limit per accident, and the third is your property damage limit per accident. All amounts are in thousands of dollars, so 25/50/25 means $25,000 per person, $50,000 total per accident for injuries, and $25,000 for property damage.

If you injure two people in one accident and your limit is 25/50/25, the insurance company will pay up to $25,000 for the first person's injuries and up to $25,000 for the second person's injuries, but no more than $50,000 total. If medical bills exceed those limits, the injured people can pursue you personally for the difference. This is why carrying only your state's minimum limit can be risky — a serious injury or multiple injured people can easily exceed low limits.

Most states require minimum liability limits between 15/30/5 and 25/60/25, depending on the state. Your lender may require higher limits as a condition of the loan. Insurance companies typically recommend 100/300/100 or higher, especially if you have significant assets to protect.

What bodily injury liability covers

Bodily injury liability pays for medical treatment, hospital stays, surgery, physical therapy, and ongoing care for people you injure in an accident you cause. It also covers lost wages if the injured person cannot work during recovery, and pain-and-suffering damages awarded by a court or agreed to in a settlement.

The coverage applies regardless of whether the injured person is a passenger in another vehicle, a pedestrian, a cyclist, or someone in your own car — as long as you are found legally responsible. It does not cover your own injuries; those are covered under a separate part of your policy called medical payments coverage or personal injury protection, if you have it.

What property damage liability covers

Property damage liability pays to repair or replace the other person's vehicle, and also covers damage to their home, fence, mailbox, storefront, or any other property you damage in an accident. If you hit a parked car and cause $8,000 in damage, your property damage liability pays for those repairs (up to your limit). If you lose control and crash through someone's garage door, property damage liability covers that too.

The coverage does not extend to your own vehicle or property. Damage to your own car — whether from the accident, weather, theft, or vandalism — requires separate coverage called collision or comprehensive insurance.

What liability does not cover

Liability insurance does not cover your own injuries, your own vehicle damage, or damage from causes other than an accident you cause. If you are hit by another driver, your own medical bills and car repairs are covered by your own medical payments coverage (if you have it) and collision coverage, not by the other driver's liability insurance — though you can file a claim against their liability policy.

Liability also does not cover damage from weather, theft, vandalism, hitting an animal, or hitting an object in the road. Those losses are covered by comprehensive coverage, a separate part of your policy. If you cause an accident while driving under the influence, your insurance company will still pay the other person's claim, but they may deny coverage for your own damages and can cancel your policy afterward.

What happens if your liability limits are too low

If you cause an accident and the injured person's damages exceed your liability limits, they can sue you personally for the difference. A court can order you to pay from your bank account, garnish your wages, or place a lien on your home or other assets. This is called being underinsured, and it can have serious financial consequences.

For example, if your limit is 25/50/25 and you cause an accident that injures two people with total medical bills of $150,000, your insurance pays $50,000 (your per-accident limit) and you are personally responsible for the remaining $100,000. The injured people can pursue that amount through a lawsuit, and if they win, you may be forced to sell assets or have wages garnished to pay the judgment.

This is why many financial advisors recommend carrying liability limits higher than your state's minimum, especially if you own a home or have savings. An umbrella policy — a separate insurance product that sits on top of your auto and home insurance — can provide additional liability coverage at a low cost.

How liability claims are handled

After an accident, you report the claim to your insurance company. The company assigns an adjuster who investigates the accident, reviews police reports, interviews witnesses, and determines who was at fault. If you are found responsible, the adjuster negotiates with the injured person or their attorney to settle the claim.

If the injured person and your insurance company cannot agree on a settlement amount, the case may go to court. Your insurance company will hire an attorney to defend you (this is included in your policy), and the court will decide how much you owe. If the judgment exceeds your liability limits, you are responsible for paying the difference yourself.

Frequently Asked Questions

Does my liability insurance cover me if I'm driving someone else's car?

Usually yes, if you have permission to drive the car. Your liability coverage typically follows you to other vehicles you drive occasionally. However, if you regularly drive another person's car, you should be listed as a driver on their policy. If you cause an accident in a rental car, the rental company's insurance may be primary, and your liability coverage would be secondary.

What if I cause an accident and the other driver doesn't have insurance?

Your own uninsured motorist coverage pays for your injuries and vehicle damage if the other driver has no insurance. Your liability insurance still covers the other driver's damages if you are found at fault. However, collecting from an uninsured driver can be difficult, which is why carrying uninsured motorist coverage protects you.

Does liability insurance cover intentional damage?

No. If you intentionally damage someone's property or injure someone, your insurance company will deny the claim. Insurance covers accidents and unintentional harm, not deliberate acts. Criminal acts are also excluded from coverage.

Can my insurance company refuse to pay a liability claim?

Yes, if the claim falls outside your coverage — for example, if you were driving without a valid license, if the accident occurred while you were using the car for commercial purposes not covered by your policy, or if you failed to disclose material information when you bought the policy. Your insurance company must provide a written explanation if they deny a claim.

What's the difference between liability and collision coverage?

Liability pays for damage you cause to other people and their property. Collision pays for damage to your own vehicle from an accident, regardless of who caused it. If you hit another car, your liability pays for their repairs and your collision pays for yours. Collision is optional if you own your car outright, but required if you have a loan or lease.