To buy liability coverage only on a car insurance policy is usually the most budget-friendly option. If you're looking to save money every month, it may even feel like the only option for you. But if you're not familiar with the terms of the policy, it can end up being an unpleasant surprise if you need to file a claim. Here's what you should know about how this coverage works, and when it's the right decision for you.

Liability Covers Other People

Whether you damage a streetlamp or another person's car, liability coverage is there to account for the event that you make a mistake. It pays others for your mistakes. What it doesn't cover is you and your property. So, if you total your car in an accident, and you were to blame, you need to cover the costs to fix or replace your car. That will require buying additional coverage.

Liability-Only Coverage May Not Be an Option

If you finance your car, you generally cannot choose to only buy liability coverage. If you're leasing or financing, your lender is not going to let you take many chances.

They will likely want you to purchase coverage for your car. In this case, you'll generally need comprehensive insurance. It will cover anything from fires to riots to hitting a large animal. They might also require collision insurance, which will pay for damage to your car that occurs in a wreck.

Liability Has Limits

Your liability coverage on an auto insurance policy is not meant to pay indefinitely. This is true of all types of car insurance policies. However, liability coverage sometimes offers only very low limits. After you exceed the limit, you're responsible for the costs beyond that point.

So, if you injured someone who already had a preexisting condition, you may be on the hook for their medical costs. If these are significant, then the minimum liability coverage might not pay enough. That's why you need to increase your coverage in most cases.

If you feel that you can afford to easily replace your vehicle, then a liability-only policy might be acceptable for you. However, think of it another way. By adding other coverage to your policy, you might have to pay a few dollars extra per month. Still, it's much easier on your budget than having to deal with the sudden expense of a vehicle wreck.

When buying coverage, consider the different scenarios when you might be on the line for vehicle costs. By talking to your auto insurance carrier, you can take a big step in setting the record straight when it comes to the policy you need.

What Is Liability Only Car Insurance

Liability Covers Other People

Liability-Only Coverage May Not Be an Option

Liability Has Limits

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