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: Oct 4, 2020

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Key takeaways...

  • Most states require that you carry the minimum amount of liability insurance
  • Maxing out your insurance coverage does not eliminate your financial liability if you cause an accident
  • Comprehensive auto insurance covers damages or losses that are not the result of a collision

It is common knowledge that most states require a minimum amount of car liability insurance to register your car or drive legally.

However, purchasing only the minimum amount of car insurance may leave you open to financial liability if your insurance does not provide you with enough coverage to pay for all the damages and injuries that result from an accident.

There are other types of insurance in addition to basic liability auto insurance you should consider purchasing if you can afford it.

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Table of Contents

What is auto liability insurance?

Auto liability insurance is the type of car insurance that is required in most states. It provides payment for repairs to a car you hit. It also provides payments for medical treatments for injuries that result from an accident you which you are responsible.

However, liability car insurance only pays for repairs and injury treatment for the other driver; it does not pay for repairs to your car or injuries that you or your passenger may receive.

Car liability insurance coverage limits are outlined in a three-number sequence on your auto insurance policy.

For example, the numbers 10/30/20 on your policy mean the following: you have $10,000 of liability coverage that will be paid for each person in an accident toward medical expense payments.

You have $30,000 of liability coverage that will be paid for medical expenses for the entire accident, regardless of how many people are injured; you have $20,000 in liability coverage that will be paid toward property damage and car repairs.

In most cases, it is recommended that you purchase more than the minimum state-required amount of liability insurance.

In most instances, minimum mandatory auto liability insurance amounts are extremely low. If you are in a major accident or an accident with a newer or expensive car, chances are that minimum liability limits will not provide enough coverage to pay for all the repairs.

Additionally, if major injuries occur or if multiple people are injured, minimum car liability insurance will probably not provide enough money to pay for medical treatments.

Unfortunately, maxing out your insurance coverage does not eliminate your financial liability if you cause an accident and you will probably be sued for the remaining unpaid expenses.

However, you can purchase additional auto liability insurance to provide yourself with additional financial protection and reduce the possibility of lawsuits.

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Other Types of Auto Insurance

If you can afford it, you should purchase other types of auto insurance for financial protection. These forms of insurance can provide you with protection against auto theft, pay for repairs for your own car and pay for medical treatments.

Collision insurance will pay for damages to your car if your car is involved in an accident and hits another object.

Comprehensive auto insurance covers damages or losses that are not the result of a collision. Examples include damage to your car that results from storms, such as wind damage, a tree limb or rock falling on your car or hail damage.

Comprehensive insurance also provides payment for repairs if your car is vandalized or stolen.

If your car is financed or leased, your lender or lease-holder will probably require you to purchase comprehensive auto insurance and have them named as an additional insured on the policy.

Personal Injury Protection Insurance

Personal injury protection insurance is also known as “no-fault” or “PIP” insurance and is mandatory auto insurance in 14 states.

Personal injury protection provides payments for medical expenses due to an accident regardless of who is responsible for the accident.

Payments from PIP coverage can be applied to hospital bills, doctor visits, nursing expenses and rehabilitation expenses.

Additionally, it can be applied to lost wages and to legal costs related to litigating an accident case.

Purchasing Car Insurance

There is little doubt that purchasing car insurance is one of the most important financial choices you can make. Not only does it provide you with financial protection if your car is damaged in an accident, but it can also protect you from lawsuits.

However, buying car insurance is not an inexpensive prospect. To keep your costs as low as possible, it is important to comparison shop for the best policy rates and to get the best level of coverage possible.

One place to comparison shop is to talk to your independent insurance broker. Independent insurance brokers frequently represent a number of auto insurance providers, so they are able to comparison shop for you and provide you with the best rates possible.

Asking the right questions when talking to a car insurance agent can save you a lot of money.

Additionally, they often will take the time to talk to you in detail about your insurance needs and your financial situation and can make recommendations about the appropriate level of insurance.

Many insurance brokers also review your auto insurance policy when it is time for renewal to help you keep your premiums affordable.

You can also compare auto insurance rates by using a car insurance comparison website. Auto insurance company websites can provide you with quotes from multiple insurance companies and you only need to enter your basic information one time.

Most often, insurance websites have agents and insurance companies that contract with their services for leads regarding people who are interested in insurance.

When buying auto insurance, it is important to consider how much insurance and what type of insurance will provide you with the highest amount of protection.

Although auto liability insurance is most often the minimum level of coverage you are legally required to have, it is a good idea to purchase additional auto insurance.

Looking for basic liability car insurance? Enter your zip code below to receive FREE car insurance quotes!

References:

  1. https://www.allstate.com/tools-and-resources/car-insurance/property-damage-liability-insurance.aspx
  2. https://www.esurance.com/insurance/car/coverage
  3. https://www.allstate.com/tools-and-resources/car-insurance/personal-injury-protection-insurance.aspx
  4. http://money.msn.com/auto-insurance/car-insurance-5-questions-to-ask.aspx