Liability limits, explained
The maximum dollar amounts your car insurance will pay if you injure someone or damage their property in an accident.
What it means
Liability limits are the caps on what your insurer will pay when you're at fault in an accident. Policies are written as three numbers, like 50/100/50. The first number is the maximum per person for bodily injury, the second is the total per accident for all injured people, and the third is the maximum for property damage. So 50/100/50 means up to $50,000 per injured person, $100,000 total per accident, and $50,000 for cars, fences, or buildings you damage. Anything beyond those limits comes out of your pocket. Every state sets minimum required limits, but many drivers carry more.
Why it matters
If you cause a serious accident, minimum state limits won't come close to covering the damages. Medical bills and lost wages can easily exceed $100,000 for one injured person. If your liability limit is too low, the other party can sue you personally for the difference. That puts your savings, home equity, and future wages at risk. Higher limits cost only a little more per month but protect your assets. If you have a mortgage, retirement accounts, or significant savings, you need limits well above your state minimum.
What to do
Before you finance a new car, compare how much higher coverage will cost. Check our comparisons tool to see how insurance premiums vary across models and trim levels, so you can budget for adequate protection.
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