Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Apr 7, 2022

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Getting caught driving without insurance can cost you a lot in the way of fines and higher insurance premiums…not to mention you’ll need to get an SR22 as part of your punishment.

In case you haven’t heard, liability car insurance coverage is mandatory in most states, and you should not operate a car without at least the minimum car insurance coverage.

There are two main components of liability car insurance.

The first is bodily injury to OTHERS as a result of an accident you cause, such as injuring another driver or their passengers. This part helps cover any medical bills the other driver or passengers might accrue due to the accident. Without having this protection, you’d have to pay out of pocket for any of their medical expenses.

The second type of liability coverage built into your personal auto policy is property damage coverage for an accident you cause, such as totaling someone else’s vehicle or destroying their personal belongings. This means that if the person was moving and had boxes of belongings in the back of their car, those are covered, as well as anything that’s happened to the vehicle. Flat tires, broken windshield, or if it was just a fender bender, your property damage coverage would protect you against having to pay for any of it.

What do liability limits mean?

Simply put, these are the dollar amount limits your insurer will pay another party for an insurance claim you are found liable for, whether it’s for medical expenses or collision coverage.

Regardless of what type of risk you are or which car insurance company you choose to buy from, you will have to select the limits of insurance you desire.

Each state determines their own minimum insurance limits, so depending upon where you live, there will be a minimum amount that must be purchased. Generally your insurer will tell you up front if there are any minimum requirements, but don’t be afraid to ask.

There are many aspects to consider in evaluating what you need and more importantly, what you can afford. So take the time to determine how much car insurance you need.

Automobile insurance liability limits are typically expressed in the following three-bracket format:

per person/per occurrence/property damage

These limits are also expressed on your personal auto policy numerically as shown below:


100 The first number listed is the limit of insurance you have for injury to EACH person in the event of one accident you are found liable for.

Up to $100,000 will be paid to each individual, but not to exceed the total of $300,000 for each occurrence, or accident.

300 The second number listed is the dollar limit of bodily injury liability you have for each occurrence, or accident.

Regardless of how many people you injure in one accident, the most money your insurer will pay is $300,000 total.

50 – The third number listed is the limit of liability insurance you have for damage to someone’s property in the event of one accident you cause.

It does not matter how many vehicles, or any other property (a mailbox for example) you damage.  Your insurer will pay a maximum $50,000 per occurrence for others’ property.

Note: Many insurers also offer the option of purchasing a combined single limit for your policy. This is quite a bit more common for commercial auto insurance policies.

Let’s look at an example of the limits in action:

You have limits of 100/300/50. You are found liable (at fault) for an accident in which you injure three people and damage their vehicle.  The following is a list of the damages awarded by the courts:

Person #1 – $50,000 in injuries
Person #2 – $125,000 in injuries
Person #3 – $15,000 in injuries
Other driver’s vehicle – $35,000 damage

Your insurer would pay the following amounts:

Person #1 – $50,000 (per person limit of $100,000 is not exceeded)

Person #2 – $100,000 (even though the court awarded $125,000, your per person limit is $100,000.  You would be personally responsible for the additional $25,000.  This example illustrates why you should choose the highest limits you can afford)

Person #3 – $15,000 (per person limit of $100,000 is not exceeded)

Other person’s vehicle – $35,000 (the property damage limit of $50,000 per occurrence is not exceeded)

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Are there any liability limits or court costs?

The cost your insurer pays to defend you in any court case, which can actually cost more than the final settlement, is in addition to any resulting liability damages awarded to the other party.

For example, if you have $100,000 each occurrence liability limits, and the limit is exhausted, meaning your insurer had to pay all $100,000 to a person you injured, your insurer will pay the court costs on top of the $100,000, regardless of how much it costs.

Note: Once your liability limits are exhausted, exclusive of court costs, you are on the hook for any damages that exceed that amount.

This is why you need to determine what limits you need – higher is always better. Your car insurance may help you avoid bankruptcy if you cause a particularly nasty accident! Instead of having to pay out of pocket, depending on the coverage limit you have, your provider would end up paying for the cost of repairs, any medical costs, as well as any additional costs that crop up due to the accident. That’s a lot of money for something that has  a slim chance of happening.

So there you have it.  Accident expenses can be just that, expensive. Even if it’s just a fender bender, that can still set you back. Keep in mind that liability car insurance coverage is only one piece of the puzzle when it comes to being properly covered. Carve some time out from your day, play some relaxing music, and dig deep into what kinds of coverage are out there, and what would be a good fit for you.

In addition to this basic liability coverage, you also want to read about physical damage coverage, Personal Injury Protection (PIP), Med Pay, Uninsured Motorist (UM), Underinsured Motorist (UIM), and No Fault insurance.