What is liability insurance?

Liability insurance pays for bodily injury or property damage you cause to others. It covers legal defense costs and damages up to your policy limit — it does not cover your own injuries or property.

What liability insurance covers

Liability insurance covers two categories of loss you cause to others: *bodily injury* (medical bills, lost wages) and *property damage* (repair or replacement of another person's property). It typically also pays for your legal defense costs if someone sues you, up to the policy limit. The Insurance Information Institute (III) describes liability coverage as paying for the policyholder's legal responsibility to others for bodily injury or property damage.

Common types of liability insurance

Auto liability: Required by law in nearly every state. Covers injury and property damage you cause to others in an at-fault accident. Does *not* cover your own vehicle or injuries.
Homeowners/renters liability: Covers accidents on your property — e.g., a guest injured and suing you — and certain incidents away from home.
Umbrella liability: Provides additional coverage above the limits of underlying policies (auto, home), activating when those limits are exhausted.
Commercial general liability (CGL): Covers businesses against third-party bodily injury and property damage claims.
Professional liability (errors & omissions): Covers professionals against claims of negligence in providing services.

What liability insurance does not cover

Liability insurance does not cover your own injuries, your own vehicle or property damage, or intentional acts. Separate coverages — collision, comprehensive, medical payments, uninsured motorist — address your own losses.

Key facts on liability insurance

Auto liability coverage pays for the policyholder's legal responsibility to others for bodily injury or property damage from an at-fault accident. — III — Auto Insurance Basics
A commercial general liability (CGL) policy covers defense costs and damages, up to policy limits, for third-party bodily injury or property damage. — III — Commercial General Liability
Umbrella liability insurance provides extra protection that activates after underlying policy limits (auto, home) are exhausted. — III

Key takeaways

Liability insurance covers harm *you cause to others* — not your own losses.
It pays for legal defense costs plus damages up to the policy limit.
Auto liability is legally required in nearly every state; homeowners/renters liability is included in standard policies.
Umbrella policies extend liability limits above your underlying auto and home policies.