Definition and Core Purpose
Auto liability insurance is a mandatory coverage that pays for bodily injury and property damage you cause to others in a car accident. It does not cover your own injuries or vehicle repairs.
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Key Components
Liability splits into two parts: bodily injury liability, which reimburses medical expenses, lost wages, and legal fees for the other party, and property damage liability, which pays for repair or replacement of the other party's vehicle or property.
State Minimum Requirements
Each state sets minimum liability limits, often expressed as three numbers (e.g., 25/50/10). The first two figures are per‑person and per‑accident bodily injury limits in thousands of dollars, while the third is the property damage limit.
How It Protects You
If a claim exceeds your policy limits, you become personally liable for the excess, potentially risking your assets. Higher limits reduce this risk and may lower premiums by demonstrating lower perceived risk to insurers.
Choosing the Right Limits
Consider your net worth, driving habits, and typical accident scenarios. Many drivers opt for limits higher than the state minimum, such as 100/300/50, to ensure broader protection.
Comparison of Common Limits
| Limit | Bodily Injury (per person) | Property Damage |
|---|---|---|
| State Minimum | $25,000 | $10,000 |
| Moderate | $50,000 | $25,000 |
| High | $100,000 | $50,000 |