Every state in the United States except for New Hampshire and Virginia requires its drivers to have liability car insurance. Since you’re likely going to need it if you want to drive your car legally, it’s a good idea to get acquainted with what liability car insurance is and how it works. Whether you’re just starting your first insurance plan or you just need a refresher in the world of car insurance, FIXD is here to fix you up with the simplified information you need.
How Does Liability Car Insurance Work?
Liability car insurance is the entry-level car insurance policy. In the event of a collision, liability car insurance helps pay for the cost of damages to another party’s person and property — not yours.
Not every liability car insurance plan is the same. From insurance company to insurance company, you’ll find different monthly and annual costs, different levels of coverage, and different benefits and discount opportunities. This is why it’s so important to get several quotes to ensure you’re getting the best deal for you.
As you shop for liability car insurance, you’ll see levels of coverage that look like three dollar amounts or two-digit numbers separated by slashes (i.e. $25,000/$50,000/$25,000 or 25/50/25). These numbers tell you how much your insurance company will pay out in the event of a collision. It’s important to note here that each state — except for New Hampshire and Virginia — has its own level of minimum coverage that you need to have to legally operate your vehicle there.
What Do These Numbers Mean?
Let’s simplify what liability car insurance does before getting into what those limit numbers mean. Liability car insurance is made up of two parts: bodily injury liability, and property damage liability.
Bodily injury liability coverage helps cover any injuries that other people involved in the accident experience. This includes medical bills, but can also cover things, such as wages the person lost as a result of the accident, or pain and suffering. Property damage coverage helps pay for the damages done to another person’s property, such as a vehicle or home.
Let’s break that example down to make sense of the numbers:
The first number, which is $25,000 or 25, tells you how much your liability insurance pays out per person for bodily injury. If someone outside of your vehicle is hurt in a crash, such as a driver or passenger of another car, or a pedestrian or cyclist, your liability car insurance will cover medical costs up to $25,000 for each injured person.
The middle number, which is $50,000 or 50 in this example, represents the total amount of bodily injury payout your insurance company will give to all other people injured in an accident you’re involved in. If people involved in the crash get the max from your bodily injury limit of $25,000 (the first number of the three), your insurance will only cover two people if your middle number is $50,000.
The final number represents how much damage to other people’s property per accident your insurance will pay. This includes the other person’s vehicles, homes, and other property.
Now that you can understand these numbers, you can more effectively shop for a liability car insurance plan that works for you. Take a look at your state’s minimum requirements to make sure you’re getting the liability limits that you need.
What Doesn’t Liability Car Insurance Cover?
As we mentioned above, liability car insurance is designed to cover only damages done to other parties. Your injuries and damage done to your property are not covered by liability car insurance. If you want coverage for those, you should look into collision insurance.
This basic level of car insurance also won’t cover damages to your vehicle that occur during non-collision situations, such as hail, falling branches, and vandalism. For that, you’ll need comprehensive insurance.
How Much Does Liability Car Insurance Cost?
It can be difficult to recommend a one-size-fits-all insurance company to all drivers. One issue is that the cost of your insurance depends on many factors unique to you and your situation. Those influencing factors include, but are not limited to:
- Credit score
- Driving history
- Vehicle make and model
The average cost for liability car insurance for the nation is $59 per month, which comes out to $708 per year. According to ValuePenguin, the cheapest companies for liability-only coverage are:
- USAA: $36/month
- Farm Bureau Insurance: $39/month
- Auto-Owners: $40/month
- Erie: $42/month
- State Farm: $44/month
- American Family: $53/month
- GEICO: $56/month
- Progressive: $74/month
- Allstate: $76/month
- Nationwide: $76/month
- Travelers: $86/month
Again, keep in mind that these are national averages. Your rate may be lower than the average for the more expensive options and higher than the average for the less expensive options. It all has to do with how each company measures your situation.
How Can I Reduce the Cost of Liability Car Insurance?
You’ll find that there are a few tricks and tips that you can keep in mind if you’re looking to bring down the cost of your liability car insurance. Whether it’s through taking advantage of discounts or making changes in your life, you can save a substantial amount on your insurance in several ways.
Bundle Your Insurance
If you’re already paying for car or homeowners or renters insurance, you may be able to get a deal on a new liability car insurance plan by bundling up your insurance plans. This is a benefit that insurance companies offer to get you to let them take care of all of your insurance.
Improve Credit Score
Insurance companies may use your credit score to decide how much you should pay with your monthly fees. You can potentially lower your monthly or annual insurance bill by improving your credit score. Always pay your insurance bill on time. You can often set up automatic payments to make sure you never miss a payment.
Get Many Quotes
Shop around and get as many quotes from insurance companies as you need to be comfortable. Getting a quote doesn’t affect your credit score, as insurance companies are performing soft inquiries. Never take the first acceptable rate you see — make sure it’s a good deal by comparing it to other options.
It’s important to acquaint yourself with what liability insurance is all about so that you can make the best decision for yourself and your situation. Our team at FIXD is here to help you navigate your way through the complex world of vehicle ownership, whether you’re learning all about insurance or trying to identify the strange new sound your vehicle is making.
At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.