Car insurance is a legal requirement in almost every U.S. state, and it’s also essential for protecting yourself financially. One common option for drivers is liability-only car insurance. It’s often the most affordable type of coverage, but it comes with important limitations. Understanding what it offers—and what it doesn’t—can help you make an informed decision about whether it suits your needs.
What Is Liability-Only Car Insurance?
Liability-only car insurance is a basic form of coverage that only protects against the damages or injuries you cause to other people or their property while driving. It does not pay for your own vehicle’s repairs or for your own medical bills if you’re involved in an accident.
This type of insurance is required by law in most states and helps ensure that if you cause a crash, the victim is financially protected.
What Does Liability-Only Insurance Cover?
There are two key parts to liability-only car insurance:
Bodily Injury Liability
This covers medical expenses, lost wages, and legal costs for people who are injured in an accident you caused. It may also include pain and suffering damages and funeral costs in severe cases.
Example: If you cause a collision and the other driver is hospitalized, your bodily injury liability helps pay their medical bills and recovery costs.
Property Damage Liability
This covers the cost of repairing or replacing another person’s property that you damage in an accident. Usually, this means another vehicle, but it could also be a mailbox, a fence, or a building.
Example: If you accidentally back into someone’s garage door, your insurance helps pay for the repair.
What Isn’t Covered by Liability-Only Car Insurance?
Liability-only insurance does not protect your vehicle or your own medical expenses. Here’s what it typically doesn’t cover:
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Damage to your own car
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Injuries to yourself or your passengers
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Vandalism, theft, or natural disasters
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Towing or roadside assistance
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Rental car reimbursement
If you’re at fault in an accident, you’ll have to pay out-of-pocket for your own losses unless you have additional coverage like collision or comprehensive insurance.
How Much Liability Insurance Is Required?
Each state in the U.S. sets its own minimum requirements for liability coverage. These are often expressed as three numbers, such as 25/50/25. That means:
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$25,000 for bodily injury per person
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$50,000 for bodily injury per accident
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$25,000 for property damage
These are minimums, and while they meet legal requirements, they may not be enough in a serious accident. If the costs exceed your policy limits, you could be personally responsible for the remaining amount. That’s why many drivers choose higher coverage limits.
Who Should Consider Liability-Only Car Insurance?
Not everyone needs full coverage. Here are some people for whom liability-only insurance makes the most sense:
Drivers of Older Vehicles
If your car is old and not worth much, paying for full coverage may not make financial sense. The cost of collision and comprehensive coverage could be more than the car is worth.
Example: If your car is valued at $2,000 and you’re paying $600 per year in extra premiums for full coverage, it may not be worth it.
Drivers on a Budget
Liability-only insurance is generally much more affordable. If you’re trying to keep monthly costs low, this option can help you stay legally insured without spending too much.
Second or Low-Mileage Vehicle Owners
If you own a car you rarely drive, such as a backup vehicle or a weekend car, liability-only insurance might be enough to keep it legally on the road.
Drivers With a Solid Emergency Fund
Some drivers who can afford to replace or repair their car out-of-pocket choose to skip full coverage and carry only liability insurance.
Pros of Liability-Only Car Insurance
Affordable premiums make it easier to meet state requirements
Simpler policy with fewer complexities
Good choice for cars with low resale value
Meets legal requirements in almost all states
Cons of Liability-Only Car Insurance
No protection for your own car in case of an accident
No coverage for theft, fire, or weather damage
No help with your own medical bills if you’re injured
Could lead to major out-of-pocket costs if you’re at fault
How to Decide If Liability-Only Is Right for You
To decide whether liability-only insurance fits your needs, consider the following:
1. Car Value
Check your vehicle’s market value using online tools like Kelley Blue Book. If it’s not worth much, liability-only may be enough.
2. Financial Situation
Can you afford to repair or replace your car out-of-pocket? If so, you might not need full coverage.
3. Driving Habits
Do you drive a lot, or mostly keep your car parked? If your vehicle isn’t used daily, full coverage might be unnecessary.
4. Risk Tolerance
Some people are comfortable taking on more financial risk in exchange for lower premiums. Others prefer to play it safe with more protection.
5. State Requirements
Make sure you meet your state’s minimum liability requirements. You can increase limits beyond the minimum for extra protection.
Should You Add More Coverage Later?
Yes, many drivers start with liability-only insurance and later upgrade to full coverage when:
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They purchase a newer or more valuable vehicle
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They want peace of mind
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Their financial situation improves
It’s also common for lenders to require full coverage if you’re financing or leasing a vehicle.
Liability-only car insurance is a budget-friendly option that meets the legal requirements in most states and provides essential protection in case you cause an accident. However, it’s not suitable for everyone. It won’t help you pay for your own injuries or vehicle repairs, so it’s important to carefully consider whether you can afford those costs yourself.
If you have an older vehicle, drive infrequently, or want to lower your insurance costs, liability-only coverage might be the right choice. But if you’re driving a newer car, live in a high-traffic area, or want broader protection, you may want to explore full coverage options.