Liability Insurance for Drivers: How Much Do You Need?

Automobile insurance is designed to protect you and your vehicle if you're involved in an accident, your car is stolen or vandalized, or it's damaged in a natural disaster. Your policy's personal liability coverage protects you if you're deemed to be at fault in an accident that injures someone else or damages their property. Every state with the exception of New Hampshire has a minimum amount of liability coverage that you're required to purchase when insuring a vehicle.

What Is Personal Liability Insurance? 

Car insurance policies can feature several different coverage types, including:

• Bodily injury liability
• Property damage liability
• Personal injury protection (in certain states)
• Collision coverage
• Comprehensive coverage
• Uninsured/underinsured motorist coverage

The first two items on that list—bodily injury and property damage—represent the policy's liability coverage. 

Bodily injury liability coverage, or BI, covers physical injuries to another person if you're at fault in an accident. So, for example, if you rear-end someone with your car and they experience neck and back pain that requires an X-ray or ongoing treatment, your bodily injury liability coverage could pay for some or all of those costs, depending on your coverage limits.

Property damage liability coverage, or PD, covers damage to someone else's property if you're at fault in an accident. This coverage can extend to another person's vehicle as well as other property, such as fencing or structures. This type of liability insurance covers some or all of the cost of repairing the damage.

Personal Liability Insurance Limits

Excluding New Hampshire, every state sets a minimum threshold on the amount of personal liability insurance drivers need to have. Depending on your state's requirements, you may see three different liability limits included on your policy:

• Bodily injury liability limit per person
• Bodily injury liability limit per accident
• Property damage liability limit

Bodily injury liability limit per person

The bodily injury liability limit per person is the maximum amount your car insurance company will pay toward someone else's medical expenses if you're involved in an accident and are at fault. So, for example, you may be covered up to $25,000 per person if an accident results in physical injuries to someone else. 

Bodily injury liability limit per accident

The bodily injury liability limit per accident is the maximum amount your insurance company will pay toward medical expenses for a single accident. So, say you have a bodily injury liability limit per accident of $50,000. That's the most your policy would pay toward medical expenses, regardless of how many people were injured in the accident.

Property damage liability limit

Your property damage liability limit is the maximum amount your insurer will pay toward property damages if you're at fault in an accident. If your policy has all three types of liability insurance, it's typical to see these numbers expressed in an abbreviated format. For example, if you have a $100,000 bodily injury liability limit per person, a $300,000 bodily injury liability limit per accident, and a $50,000 property damage liability limit, it might be noted as 100/300/50 on your policy. 

Why Do You Need Personal Liability Insurance? 

Personal liability insurance is designed to protect you against substantial financial losses associated with an accident that you caused. If you are in an accident and injure someone, resulting in a $50,000 medical bill, you'd be responsible for paying it out of pocket if you don't have bodily injury liability coverage. And if you can't come up the money to pay, you could be sued in court. 

Other coverages in your insurance policy serve other purposes. Collision coverage, for example, pays for damages to your car following an accident. Comprehensive coverage can pay for damages that aren't strictly accident-related, such as those caused by falling objects. And medical payments coverage would pay for your own medical expenses if you're hurt in an accident. Your regular health insurance can help pay, as well.

How Much Personal Liability Insurance Should You Buy?

At a minimum, your liability coverage must meet the requirements for your state. The amount you'll pay for this insurance will depend on several factors, including the policy's coverage amounts and your driving record.

In many states, the minimum coverage requirement is 25/50/25, meaning:

• $25,000 bodily injury liability limit per person
• $50,000 bodily injury liability limit per accident
• $25,000 property damage liability limit

But whether those limits are sufficient can depend on a number of things, including your financial resources. 

Say you're in an accident that causes injuries to three people. Their total medical expenses come to $75,000. If you have a bodily injury liability limit of $50,000 per accident, you'd have to come up with the other $25,000 yourself to pay their remaining medical bills. 

Having more personal liability insurance coverage can help avoid situations where you may be required to pay large amounts out of pocket after an accident. But keep in mind that increasing your coverage limits will also increase your premium costs. If you're unsure of how much personal liability insurance to buy, your insurance agent may be able to help.