Liability car insurance pays out when you cause a car accident. It will pay for the medical bills and property damage for others. Here are important things to know about liability insurance for your car:

  1. Liability car insurance does not pay for any damage to your own car. If you want that type of insurance, buy comprehensive and collision insurance. If you have a car loan, your lender probably already requires them.
  2. Many states require car owners to buy liability insurance. But the minimum required amounts are low.
  3. If you cause an accident and the damage and/or injuries cost more than your policy amounts, you're still responsible for the rest. Others can sue you for what your car insurance didn't cover.

Is car insurance required in every state?

No, not all states require car insurance. But every state except New Hampshire requires some form of "financial responsibility." In those states, you can skip car insurance and instead post a bond or deposit cash with the state. Most people find it easier to buy car insurance rather than give the state about $50,000 or more.

Alaska residents who live in areas not connected to roads are not required to register their cars or buy car insurance.

And even New Hampshire requires some form of financial responsibility (like auto insurance or a bond) if you've caused an accident.

How to read liability numbers

Liability car insurance is often written as a series of three numbers, such as 100/300/50. Here's what it means:

  • First number: Amount of liability for injuries per person
  • Second number: Amount of liability for injuries per accident
  • Third number: Amount of liability for property damage per accident.
Example: What 100/300/50 means
  • $100,000 for injuries per person
  • $300,000 for injuries per accident
  • $50,000 for property damage

Remember, if you buy only liability insurance none of those amounts pay for your own medical bills or car damage.

What happens if you don't have enough liability car insurance

You can be sued for medical bills and property damage that are more than what your insurance covers. If you have assets that you could lose in a lawsuit, like savings, it's smart to buy more than the minimum insurance required by your state. Here's an example of what could happen if you don't have enough insurance.

Consequences of having a low amount of liability car insurance
You have insurance for: You cause a car accident with: You can be sued for:
  • $15,000 bodily injury liability per person
  • $30,000 bodily injury liability per accident
  • $5,000 property damage liability per accident
  • $30,000 in medical bills for one person
  • $15,000 in damage to someone else's car and a fence you hit
  • $15,000 in medical bills
  • $10,000 in property damage

Getting the best deal on liability insurance for your car

Whether you choose to buy only liability insurance or a full coverage car insurance policy, the best way to save money is to shop around. Get car insurance quotes from a few companies. Ask your insurance agent to review possible discounts. And try to avoid tickets and accidents.

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