Yes, you can technically have only liability insurance on a financed car, but it is almost never allowed by your lender. When you finance a vehicle, the lender (the lienholder) has a financial stake in the car until you pay off the loan. They will require you to carry full coverage insurance, which includes comprehensive and collision coverage, to protect their asset.
Liability insurance only covers damages you cause to other people's property and their medical bills. It does not cover repairs to your own car if you're in an accident, or damage from theft, vandalism, or natural disasters. If your financed car is totaled and you only have liability, you would still be responsible for the entire loan balance on a car you can no longer drive.
Lenders enforce this requirement through a process called "force-placed insurance." If your insurance lapses or doesn't meet their standards, they will purchase a very expensive policy on your behalf and add the premium cost to your monthly loan payment. This forced policy protects their interests, not yours, and offers you no personal coverage.
The specific requirements can vary by state, as each sets its own minimum liability limits. However, the lender's requirements will always be the stricter standard you must meet.
| State | Minimum Bodily Injury Liability (per person / per accident) | Minimum Property Damage Liability | Typical Lender's Full Coverage Requirement |
|---|
| California | $15,000 / $30,000 | $5,000 | Comprehensive & Collision with a $500 deductible |
| Florida | $10,000 / $20,000 | $10,000 | Comprehensive & Collision with a $1,000 deductible |
| Texas | $30,000 / $60,000 | $25,000 | Comprehensive & Collision with a $500 deductible |
| New York | $25,000 / $50,000 | $10,000 | Comprehensive & Collision with a $500 deductible |
| Illinois | $25,000 / $50,000 | $20,000 | Comprehensive & Collision with a $1,000 deductible |
The bottom line is that while state law might permit liability-only coverage, your loan contract will almost certainly forbid it. Always check your financing agreement and talk to your insurance agent to ensure you have the correct coverage to avoid serious financial and legal trouble.
