All states require a minimum amount of auto liability insurance coverage for any vehicle that is driven on state roads and highways. In fact, some states require that you provide proof of liability insurance coverage before they will issue a license plate for a vehicle or renew your vehicle’s annual registration. So, it’s important to know exactly what car liability insurance is as well as if it is the right type of car insurance coverage for you.
Liability insurance on an automobile is much different than comprehensive collision insurance. Liability insurance pays the costs associated with repairing car damage and medical expenses for other people involved in an accident where you are found to be at fault. However, common liability insurance policies will not pay for the repair costs of your vehicle or your personal medical expenses. Most liability policies will, however, pay for the medical expenses of passengers in your vehicle. However, some liability policies will even exclude payment for these costs as well.
Auto liability insurance is the cheapest type of car insurance available for your vehicle. Also, it is the type of auto insurance that is required in every state. Depending on the make and model of your vehicle, liability auto insurance can be a fraction of the cost of comprehensive collision car insurance, which pays for most damages to your vehicle as well as your personal medical expenses—even if you’re at fault. On some older vehicles, comprehensive collision car insurance may cost more than $1000 per year; whereas, liability insurance on the same vehicle may be purchased for as little as $200 to $300 per year.
Minimum policy limit requirements for auto liability insurance vary by state; however, all states require the same type of liability coverage. All states will require that a liability insurance policy cover bodily injury claims as well as property damage claims on a per person and per accident basis. Typical individual policy minimums for bodily injury range from about $10,000 to $30,000 per person and $20,000 to $50,000 per accident—for all individuals that might be covered. Additionally, minimum policy limits for property damage are very similar in amount to bodily injury minimum limits.
In most cases, you will only be able to purchase liability insurance if your car has been fully paid off and you are the legal titleholder. If you are merely the registered owner, and your car has a lien holder, such as a bank or credit union, you’ll be required to maintain comprehensive collision insurance.
Most auto loan lenders will not allow you to purchase only a liability policy. If you attempt to do so, the lender may choose to purchase full coverage insurance and then pass the cost of the insurance on to you. Almost all car loan contracts contain language that allows for this, and you must agree to it before the lender will extend the loan.
Even if your vehicle is paid off, you may want to avoid liability insurance policies when the vehicle is still of significant value, and paying the higher cost of collision comprehensive collision premiums is cheaper than a major repair on the vehicle. However, if your vehicle is old or not worth very much money, then a liability insurance policy may be all that you need. With older vehicles, full coverage policy premiums may cost you more than the car is worth.