Types of liability insurance
Auto liability insurance
Every auto policy contains liability coverage because it’s required by law in all states except for New Hampshire (New Hampshire still requires you to show financial responsibility if you cause an accident).
What does liability insurance cover?
If you’re at fault in an accident, your liability limits pay for damages and injuries you cause to others, including:
- Damage to other cars
- Damage to property (mailbox, house, street sign, guardrail, etc.)
- Injuries to other drivers/pedestrians
- Lawsuits and attorney/court fees
Auto liability insurance examples and how it works
The minimum coverage amounts will vary by state, and you’ll usually see three separate numbers that indicate your limits of liability. For example, the minimum limits for auto liability in Illinois are $25,000/$50,000/$20,000. Here’s what those numbers mean:
Bodily injury per person: $25,000 is the max amount your insurance company will pay out for injuries per person.
Bodily injury per accident: $50,000 is the max amount your insurer will pay out for injuries per accident.
Property damage per vehicle: $20,000 covers damage to someone else’s vehicle or property per accident.
Consider the two scenarios below, assuming your liability limits are $25,000 per person/$50,000 per accident/$20,000 for property damage.
Example one: You hit another driver and cause them $20,000 in injuries and $15,000 in property damage. Your insurance should pay both amounts because all injuries and damage fall below your coverage limits.
Example two: You’re at fault in a car crash, but it’s a bit more complicated because you injured the driver and two passengers. All three have $25,000 in injuries, totaling $75,000. You might think you’re covered because you have $25,000 in bodily injury per person. However, $50,000 is the maximum your insurer will pay out per accident based on your coverage. You’re now on the hook for the remaining $25,000.
When do I need a CSL?
If you prefer not to have separate limits for bodily injury and property damage, you can select coverage with one combined single limit (called a CSL). CSL amounts usually range between $300,000 and $500,000. That’s usually a costlier option because it provides more flexibility and a higher amount of coverage.
How much auto liability insurance do I need?
You’ll usually have a choice as to how much coverage is right for your situation. If you’re liable in an accident, a court judgment could cost you your life savings so you’ll want to make sure you’re well-covered. Add up your assets, including bank, brokerage, retirement accounts, and equity in your home and other property. That equals your total net worth. Then consider choosing at least that amount for bodily injury liability, as your total net worth can grow. Keep in mind, bodily injury typically results in more expensive claims than property damage.
Note that the cost of bodily injury liability will vary by coverage amount and per driver, and the difference between the state minimum price and $100,000 is often minimal.
You should consider getting enough liability insurance to cover your total net worth.
Progressive quick facts
- 60% of customers choose more than their state’s minimum limits for bodily injury
- 67% of customers choose more than their state’s minimum limits for property damage
- About 9% of liability claims cost over $20,000
- 3% of bodily injury or property damage liability claims cost over $50,000
- About 2% of liability claims cost over $100,000
While those figures suggest it’s unlikely you’ll need more than $50,000 in liability, remember liability exists to protect your assets against the worst-case scenario in which you’re responsible.
Need help figuring the right amount of liability coverage? One of our licensed insurance representatives can counsel you through the choices in your state. Just call 866-749-7436 for a free quote or get an auto insurance quote online and we’ll help you choose a coverage amount.
Personal liability insurance
Every homeowner, condominium, renters, and manufactured home policy includes personal liability, which covers you if you’re liable for an accident inside or outside your residence.
What does personal liability insurance cover?
- Dog bites (Check with your insurer to make sure your dog’s breed is covered. Many insurers will require you to purchase animal liability coverage to be covered for dog bites.)
- Injuries on your property
- Damage to others’ property if you or your family members are at fault (for instance, your child hits a baseball through a neighbor’s expensive stained-glass window)
- Lawsuits and lawyer/court fees (if you’re sued over an accident, it can be costly)
How much personal liability do I need?
Homeowners and renters policies commonly offer three limits of personal liability:
As with auto liability, you’ll want to protect your assets by selecting a coverage amount that matches your assets. If you want more liability coverage than a half million, you’ll want to think about purchasing an umbrella insurance policy which provides extra limits of liability for home or auto insurance.
Need help? One of our licensed insurance representatives can guide you through the choices in your state. Just call 866-749-7436 or go online for a free insurance quote on homeowners, renters, condo, or manufactured/mobile home insurance and we’ll help you choose a coverage amount.
General liability insurance
Also known as commercial general liability (CGL), this type of policy protects businesses from bodily injury and liability claims. Suppose you’re a store owner, and a customer slips on a wet floor and is injured at your storefront. They may sue your business for bodily injury. Or maybe you own a plumbing business and one of your employees mistakenly leaves a faucet running and floods your customer’s home. You’re then responsible for property damage. A CGL policy pays out so your business doesn’t have to. And because there are so many risks involved in owning a business, general liability insurance can be vital to your livelihood.