Insurance

What is Liability Coverage?

Liability coverage pays for damage or injuries you cause to others. It’s a standard part of auto and homeowners insurance. It does not pay for the policyholder's own injuries or property damage. Most states legally mandate minimum levels of auto liability coverage to protect road users.

Maintaining adequate liability limits is critical to protecting personal assets. If a policyholder is sued for an accident and their liability coverage is insufficient, their personal savings, home equity, and future wages can be targeted to satisfy the judgment.

Quick Facts

Beneficiary TargetPays third parties for losses caused by the insured

Coverage ScopeBodily injury liability and property damage liability

State MandatesRequired by law for auto operators in nearly all states

Asset ShieldingPrevents personal assets from garnishment in lawsuits

PRACTICAL EXAMPLE

A driver causes a collision that damages a $40,000 vehicle and injures the other driver. The policyholder's auto liability coverage pays for the vehicle repairs and the injured party's medical bills, up to the policy's bodily injury and property damage limits.

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RELATED TERMS

Learn More Key Concepts

Umbrella InsuranceExcess liability insurance providing additional protection above standard auto and homeowners policy limits.

Coverage LimitThe maximum amount an insurance company will pay for a covered loss under a policy.

ClaimA formal request to an insurance company for payment or coverage under the terms of a policy.

DeductibleThe amount a policyholder must pay out of pocket for covered claims before their insurance coverage begins to pay.

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