Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 21, 2020

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Key takeaways...

  • Rental car companies offer drivers expensive liability car insurance coverage
  • If you borrow your friend’s car for a few days, their liability car insurance policy will cover your negligence
  • Unless you do not own a car, you need to purchase liability car insurance

Liability car insurance protects you from the risk of being sued by third parties for negligence.

When you are sued by a third party for negligently causing a car accident, your liability car insurance company must settle all reasonably clear claims and indemnify you for all sums for which you are held liable.

Unless you do not own a car, you need to purchase liability car insurance.

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Table of Contents

Maintaining Liability Car Insurance is Required By Law

Drivers in every state except New Hampshire are required to carry minimum liability car insurance in the amount set forth by state law.

Public policy dictates that drivers should carry liability car insurance because there should be money to compensate damaged third parties if the driver negligently causes an accident.

Drivers in most states cannot register their cars without showing proof of liability car insurance.

New Hampshire requires proof of financial responsibility, meaning that the driver must prove that he is financially capable of paying for damages to third parties in case of an accident.

If you are caught driving a vehicle without proof of liability car insurance, you could face license suspension, hefty fines, revocation of vehicle tags, loss of the car and possibly jail time.

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Liability Car Insurance Can Protect Your Assets

Liability car insurance with limits higher than the state-required limits is especially critical for drivers who have substantial assets to protect.

The state-required minimum liability car insurance limits will almost never be enough to compensate third parties who suffered bodily injury and property damage as a result of a car accident.

After the limits of the liability car insurance policy are exhausted, you are left to personally cover the balance of the damages out of your pocket.

If you do not have the cash to cover the balance, the court can issue an order to seize and liquidate your investments, your vehicles and maybe your home.

If You Cause an Accident While Driving a Rental Car

Temporary liability car insurance is short-term car insurance. Usually, one to thirty days is the policy period for temporary liability car insurance.

Temporary liability car insurance is more expensive when compared to permanent car liability insurance on a pro rata basis, but temporary liability car insurance may be a good idea if you are concerned about your insurance rating.

You may be tempted to forego buying this coverage because it is costly, and you know that your personal liability car insurance policy will extend to accidents that you may cause while driving the rental.

However, consider what you could lose if you cause an accident while driving a rental car and you tender a claim to your insurance carrier.

On the other hand, if your insurance company already considers you a high-risk driver, one more claim could make your insurance rates skyrocket.

Temporary liability car insurance may be a good solution to protecting your wallet and your insurance rating.

By buying a temporary liability car insurance policy, you can prevent any adverse effects on your insurance premium and rating.

When You Lend Your Car To Someone or Borrow Someone Else’s Car

As a general rule, insurance follows the car, not the driver. Consequently, if your friend needs to borrow your car for a few days, your liability car insurance policy will cover your friend’s negligence.

If you borrow your friend’s car for a few days, his/her liability car insurance policy will cover your negligence.

Moreover, where friends are borrowing each other’s cars, temporary liability car insurance may be a good idea to help preserve the friendship during the aftermath of an accident.

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References:

  1. https://www.allstate.com/auto-insurance/liability-insurance.aspx
  2. https://www.thebalance.com/understanding-minimum-car-insurance-requirements-2645473
  3. https://www.thebalance.com/temporary-car-insurance-what-are-the-options-2645566
  4. https://www.statefarm.com/insurance/auto/resources/high-risk-auto-insurance
  5. https://www.allstate.com/tools-and-resources/car-insurance/factors-affect-your-auto-insurance.aspx