What is liability insurance?

Automobile accidents happen. That's just a fact we all need to come to terms with. From a bumper tap to having your car totaled, it's a stressful event, and things get significantly worse if it's your fault. Besides the feelings of guilt, an accident also exposes you to potentially large financial burdens. That's where car insurance comes in. But what is liability insurance? Unlike your usual collision, comprehensive and medical coverage that protects you and your vehicle, car liability insurance covers the cost of damage to other vehicles, people and property. 

Let's say you get in a minor fender bender that is your fault. Maybe you couldn't stop in time when traffic came to an abrupt halt and you rear-ended another vehicle. You're physically fine, if not a bit flustered. Your car has sustained some cosmetic damage that your collision insurance policy covers. Unfortunately, the vehicle you bumped into received the brunt of the impact and the driver is complaining of a sore neck. Car liability insurance ensures you won't have to pay for their vehicle repairs or medical bills — but there are limitations.

Most states make car liability insurance mandatory for all drivers and also have minimum insurance coverage requirements. In California, for example, drivers have to carry $15,000 in liability coverage for bodily injury per person, $30,000 for bodily injury per accident, and $5,000 for property damage per accident. 

In the aforementioned scenario, we'll imagine the driver had a minor whiplash that would have cost them $2,000 in medical expenses and $3,500 to fix their vehicle. Those fall well within the coverage for a California-based driver, which means you wouldn't have to pay anything out-of-pocket to make them whole again.