What is liability car insurance and what does it cover?

Liability car insurance is required to get behind the wheel in nearly every state and can protect you financially by paying for damages or hospital bills if you're found responsible for an accident.

But it doesn't cover everything.

Here's what you need to know about liability insurance, including what it covers, the top companies that offer it and the minimum coverage requirements in each state.

Liability insurance is the most basic form of auto coverage. If you cause an accident, it pays for the other driver's expenses, whether that's medical care or repairs to their car or. It doesn't pay for repairs to your own car, however — that requires comprehensive or collision coverage.

Every state but New Hampshire requires motorists to have liability insurance, which typically has two core components.

• Bodily injury liability: This covers other people's medical expenses or lost income stemming from an accident you caused. It can also help pay your legal fees if there is litigation. Bodily injury liability coverage typically has per-person limits and a total maximum per accident.
• Property damage liability: This covers damage done to another person's car, as well as personal property, like a mailbox or a porch.

Some states require drivers to have other kind of coverage, as well.

• Uninsured motorist (UM)/underinsured motorist (UIM)coverage Approximately 20 states require drivers to have UM/UIM coverage in case they're in a collision with someone who doesn't have enough coverage or any insurance at all. UM coverage can also be useful if you're involved in a hit-and-run accident.
• Personal injury protection (PIP): If you live in one of the 12 states with no-fault insurance laws, you're required to have PIP, which pays for medical expenses, lost wages and other costs for you or your passengers after an accident, regardless of fault.
• Medical payment (MedPay): In Maine, New Hampshire and Pennsylvania, drivers must have MedPay, which is similar to PIP but considerably more limited.
• Property Protection Insurance (PPI): Michigan requires drivers to have $1 million of PP! coverage to pay for damage to "tangible property" such parked cars, lawns and fences.

We analyzed dozens of car insurance companies to find ones that stand out for liability insurance rates and coverage.

Best for discounts: Progressive

In addition to bundling discounts and rate drops for being a good student, Progressive offers reductions for switching to Progressive, for being a homeowner and for getting an online quote. If you pay your annual premium upfront, you could lower your rate up to 15%.

Best for bad credit: Travelers

Travelers has the lowest rates for liability insurance of any company we've reviewed for drivers with bad credit. Drivers who download the IntelliDrive app and allow Travelers to monitor their driving can save up to 30% on their premiums.

Best for bad driving records: Auto-Owner

A good choice if you have at-fault accidents, speeding tickets or DUIs, Auto-Owners offers below-average rates for high-risk drivers and will issue SR-22 certificates.

Best for active military and veterans: USAA

USAA is available to current and former service members and their immediate families. If you park your vehicle on base, you can receive a discount of 15% off your premiums. If you're deployed or are otherwise not using your vehicle, you may be eligible for a 60% rate reduction.

Drivers in all states except New Hampshire are required to have liability car insurance, although each sets its own minimums: In New York, for example, the minimum is $25,000 in bodily injury liability coverage per person, $50,000 in bodily injury liability coverage per accident and $10,000 in property damage liability coverage per accident.

The amount for each is generally written with slashes, so, New York's requirements are expressed as "25/50/10."

New Hampshire does not require drivers to have auto insurance but you must show proof of financial responsibility if you're held liable for injuries or damages and drivers who do buy insurance must meet minimum requirements for bodily injury and property damage liability.

Indiana requires uninsured/underinsured motorist coverage to be included in new policies but drivers may decline it in writing.

Michigan requires drivers to have $1 million in property protection insurance (PPI) and to choose from among six PIP options, ranging from $50,000 to unlimited coverage. Drivers can opt out of PIP if all household members have a qualifying health care plan or Medicare (Parts A and B).

Florida does not require bodily injury liability coverage for private passenger vehicles, only $10,000 in personal damage liability (PDL) coverage and $10,000 in personal injury protection (PIP).

Virginia is increasing requirements for bodily injury liability and personal damage liability to 50/100/25 on Jan. 1, 2025.

Having more coverage than a liability policy may not be required by your state, it could help you pay to repair or replace your car or cover medical costs if you or your passenger are injured.

Here are four basic types of coverage you might want to consider:

• Collision coverage: Pays to repair or replace your vehicle if you are at fault for a collision.
• Comprehensive coverage: Pay for damages if your car is damaged by a falling tree, vandalism or other non-collision-related cause.
• Gap coverage: If you leased or financed your car, gap insurance can pay for the difference between the depreciated value of the car your insurer is willing to pay and the balance on your loan or lease.
• New car replacement: If your car is totaled or stolen, new car replacement insurance provides you with enough money for a brand-new replacement, not just the depreciated value of your vehicle. It's typically limited to the first year or two of ownership.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every insurance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of insurance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. See our methodology for more information on how we choose the best insurance providers.

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