Every state in the U.S. requires drivers to carry some kind of liability insurance. Liability car insurance is designed to protect the people who are injured or suffer property damage when you are the one responsible for causing the accident. There are two kinds of liability insurance, one for protecting the personal injuries that someone may sustain due to the accident, and one to cover the damages done to that person’s property.

The first kind is called bodily injury liability (BI­). This coverage is designed to protect other people's bodily injuries or death, for which you are responsible. It also provides for a legal defense if another party in the accident files a lawsuit against you. Claims for bodily injury may be for such things as medical bills, loss of income or pain and suffering. Remember, bodily injury liability covers injury to people, not their vehicle. Also, bodily injury liability does not cover you on your liability insurance policy.

The second kind of liability coverage is property damage liability (PD). This coverage protects you if your car damages someone else's property. Usually it is their car, but it could be a fence, a house or any other property damaged in an accident. It also provides you with legal defense if another party files a lawsuit against you.

Liability insurance works by providing you with a safety net that covers a certain amount of the cost of the accident. Liability insurance costs vary greatly from state to state, and depending on other factors like your driving record, location, make and model of your car, age, and many other variables, you may be paying quite a bit for this required coverage. Also, the states that run on a tort insurance system will typically cost more for public liability insurance.

The minimum and maximum limits of liability insurance also vary by state, but it may be a good idea to get more coverage than the bare minimum. For example, if you live in Tennessee with the minimum required coverage, and cause an accident that leads to $40,000 worth of surgery along with $20,000 worth of property damage, you would have to pay a total of $20,000 out of pocket, because the minimum only covers $25,000 of the costs due to injury, and $15,000 of the costs due to property damage.

—AJ Register