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Liability is the foundation of every auto policy. It protects your savings, wages, and home if you injure someone or damage their property. Most drivers skim the section and hope for the best. Use this breakdown to see what liability pays, what it excludes, and how to pick limits that actually protect you.
Auto liability coverage pays other people when you cause a crash. It covers their medical bills, lost wages, legal defense, and property repairs. It never fixes your car or covers your injuries. Choose limits like 100/300/100 or higher, add an umbrella if you have assets, and pair liability with uninsured motorist, MedPay/PIP, and collision for yourself.
1) The two halves of liability
- Bodily injury (BI): Ambulance, ER, surgery, rehab, lost wages, funeral costs, and the attorney your insurer hires to defend you.
- Property damage (PD): Repairs or replacement for other vehicles, buildings, fences, signs, or business equipment you hit.
Liability is strictly for other people. To fix your car, you need collision or comprehensive. For your own medical bills, you need MedPay, PIP, or health insurance.
2) Decode split limits fast
Most policies list three numbers like 100/300/50. Translate them like this:
- First number: Max BI per injured person.
- Second number: Max BI for everyone in the crash.
- Third number: Max PD per accident.
If damages exceed these limits, people can sue you for the difference. This is why many planners suggest at least 100/300/100 or higher.
3) Split limits vs combined single limit
| Type | How it works | Best for |
|---|---|---|
| Split limits (e.g., 100/300/100) | Separate caps for each person, total injuries, and property damage | Most personal policies; cost-effective starting point |
| Combined single limit (CSL) | One pool (e.g., $500k or $1M) for both BI and PD | Drivers who want flexibility, business use, or higher assets |
4) State minimums vs real protection
| Option | Typical limits | Risk |
|---|---|---|
| State minimums | As low as 25/50/10 | One moderate crash can exceed these limits fast |
| Recommended baseline | 100/300/100 | Protects against most serious accidents |
| Higher net worth or new assets | 250/500/250 + umbrella | Shields savings and future wages |
5) How to choose your limits
- Add home equity, cash, investments, and retirement balances.
- Multiply your annual salary by three; wages can be garnished after a judgment.
- Pick BI/PD limits that cover that total. If you need more than 250/500/250, consider a $1-$5M umbrella.
- Layer in UM/UIM to protect yourself from underinsured drivers.
6) Claim math example
Here is how liability pays out in a common crash scenario.
| Scenario | 100/300/100 policy | 250/500/250 + umbrella |
|---|---|---|
| Medical bills for two people | Up to $100k per person / $300k total | Up to $250k per person / $500k total + umbrella excess |
| Property damage (three cars, a fence) | Up to $100k | Up to $250k + umbrella excess |
| Legal defense | Included, outside limits | Included, outside limits |
7) Close gaps with endorsements
Liability excludes commercial, delivery, and rideshare use by default. Ask about endorsements or a business auto policy if you:
- Drive for Uber, Lyft, DoorDash, or Instacart.
- Haul tools or supplies for work in your personal car.
- Tow trailers beyond personal-use weight limits.
- Cross state lines often; confirm rules with our state map.
8) Quick scripts for your agent
Upgrade limits:
"Quote 100/300/100 and 250/500/250. Show me the six-month price difference."
Add an umbrella:
"Price a $1M and $2M umbrella with my auto and home. Confirm it sits over my auto policy limits."
Business or rideshare use:
"I deliver and drive rideshare. Add the endorsement or commercial option so liability stays valid."
9) FAQ (fast answers)
Does liability cover passengers in my car?
Yes, it pays their injuries if you're at fault. For your own injuries, use PIP or MedPay.
Does liability fix my car?
No. You need collision or comprehensive for your vehicle.
Are legal fees included?
Yes, your insurer provides and pays defense counsel, usually outside your limits.
What if the other driver is uninsured?
Your liability does not help you. Add UM/UIM for protection.
10) Annual review checklist
- Recount assets and wage exposure; adjust limits upward if they grew.
- Check if you added a teen driver, new home, or business miles.
- Compare full coverage vs liability to ensure you did not under-insure your car.
- Store updated declarations in your glove box and digital vault.
Treat liability limits like a financial safety net. Raise them as your wealth grows, add an umbrella when you reach higher assets, and keep a copy of the policy summary with your policy decoder. Knowing exactly what the insurer will pay-before a claim-keeps your savings and future paychecks protected, and a five-minute renewal review makes sure limits never fall behind your life.