There are several coverages included within a standard auto insurance policy, one of which is property damage liability. Most states in the U.S. require that drivers carry at least a minimum amount of property damage liability coverage to drive legally. If you have car insurance, property damage coverage is an integral part of the protection that your policy provides.
“Property damage liability coverage is needed whenever there is a risk that something you own or an activity you carry out causes damage to a third party’s property,” explains Jaime Arias, a licensed property and casualty insurance agent and a Partner at AutoInsureSavings. “In the case of auto insurance, this is the portion that pays out for repairs to another driver’s car in the event you cause an accident. It will also cover damage to other kinds of property such as signposts or any kind of physical property up to the policy limit.”
Most car insurance companies offer property damage liability coverage, but it can still be helpful to understand the intricacies of this auto insurance coverage. If you are found at-fault in an accident, property damage liability insurance could pay to repair the damages that you cause to another person’s property.
What is property damage liability coverage?
When you cause an accident, property damage liability coverage is designed to pay for the damages that you cause. This is typically the damage that you cause to another vehicle, but property damage insurance may also pay for damages to property inside a vehicle, as well as stationary objects that you damage like signs, buildings or fences.
“Your property damage liability coverage will have a stated limit,” explains attorney Brandon Yosha, a personal injury lawyer at Yosha Cook & Tisch. “Your insurance will cover damage to another’s property up to this limit, and you would be required to pay for the additional damage above that limit.”
Insurance coverage limits are usually written as a series of three numbers separated by slashes, such as 100/300/50. This is an abbreviated way of expressing coverage that means $100,000 in bodily injury liability coverage per person, $300,000 in bodily injury liability per accident and $50,000 for property damage liability. Property damage liability coverage is the last number written in the sequence. In general, you will pay more for higher limits of coverage.
What does property damage liability insurance cover?
Property liability insurance provides specific protections that activate if you are at-fault in an accident. Property damage coverage usually covers:
- The other vehicle: Your auto insurance company will generally pay for repairs that you cause to another vehicle, including parts and labor, out of your property damage liability coverage.
- Objects outside your vehicle: Property damage liability also covers damages you cause to external property, such as a fence, sign or building.
- Contents of the other vehicle: If you cause an accident that damages personal property inside someone’s vehicle, such as a car seat, your property damage coverage could pay for their damaged belongings.
You may notice that coverage for your own property is not included. Property damage liability coverage only covers damages that you cause to others. If you want coverage for the damage to your own vehicle, you will need to add collision and comprehensive coverage to your car insurance policy. If you have belongings inside your car that are damaged in an at-fault accident, those would typically be covered by your homeowners or renters insurance policy, but would generally be subject to the deductible on that policy.
How much property damage coverage should you purchase?
Every state has its own minimum requirements for car insurance. A minimum amount of property damage liability coverage is legally required in most states.
“Almost every, if not every, insurance policy includes coverage for property damage to another’s property,” says attorney John R. Gorman, Partner and Personal Injury Lawyer with Lutz, Shafranski, Gorman & Mahoney, P.A. “If you or a family member cause an auto collision, your auto insurance’s property damage coverage will pay for the other party’s property damage caused. It is important to have the most property damage coverage that you can afford because if you total an expensive car, your assets could be at risk with a low property damage coverage limit.”
When it comes to property damage liability insurance, you may want to consider purchasing higher limits than the state minimum level. If you cause an accident and the damages are greater than your policy limit, you are responsible for paying the overage out of pocket, which could cause significant financial stress. Before you finalize your auto insurance policy, talk to your agent about how much property damage coverage is right for you.
How to file a property damage liability claim
If you cause damage to another person’s property and do not want to pay the damages out of pocket, you will need to file a property damage liability claim with your insurance company.
E. Nathan Harris, the managing partner at Abogados Centro Legal, a personal injury law firm in Birmingham, Alabama, illustrates a potential property damage claim. He says, “For example, imagine that you are driving and the vehicle in front of you stops at a red light and you couldn’t stop in time and rear-end it.”
In the event of an accident, these tips could help you to resolve the issue as quickly as possible:
- File a police report: Whenever you are in an accident, you may want to consider filing a police report. Insurance companies generally do not require police reports, but such reports can be a good way to document both your information and the other driver’s information, as well as the details of the crash.
- Take photos of the damage: It can be easy to forget details in the aftermath of an accident. Taking photos and notes as soon as you can may help you to keep track of the damages.
- Report the accident to your insurance company: As soon as you are able to, report the accident to your insurance company so it can begin the claim process. You may be able to do this by calling your insurance agency, calling your insurance company directly or by using a claim tool online or in an app.
Harris advises that you gather the following information to provide to your insurance company:
- The date of the accident
- A description of the accident
- Your personal information, such as your driver’s license number and date of birth
- Your vehicle information
- The other party’s personal information
- The other party’s vehicle information
After your claim is filed, you will likely speak with an insurance claims adjuster. This is the person who will handle your claim and assist you with questions along the way. The adjuster will review the property damage you caused to the other party and facilitate the payments necessary to repair the damages.
If you have damage to your vehicle and you carry the appropriate coverages, your adjuster will also review your damages and issue payment, minus the applicable deductible, to repair your vehicle.
Umbrella policies and property damage liability
If you are in need of liability limits higher than what your company offers on your auto insurance policy, you may want to consider purchasing an umbrella policy. An umbrella insurance policy provides excess liability coverage that can extend to your underlying policies, such as your home insurance policy, auto insurance policy and boat insurance policy.
“One of the advantages of this policy is that it not only protects you, it also protects other members of your family or household in the case they are liable for an accident,” explains Harris.
With umbrella insurance, you typically receive liability coverage for injuries, property damage, some lawsuits and certain personal liability situations.
“You can obtain an excess policy (also known as an umbrella policy) to cover additional damages that your standard policy does not cover,” says Yosha. “For example, if you crashed into a building causing $100,000 in damage with a $50,000 limit in property damage liability and a $200,000 umbrella, then your automobile insurance would cover the first $50,000 in property damage liability, and your umbrella would cover the second $50,000. If you did not have the umbrella in place, you would potentially be personally liable for the second $50,000.”
However, to qualify for an umbrella policy, your insurance company may require that you hold a minimum amount of liability on your underlying policies, such as $100,000 in coverage.
Frequently asked questions
Do I need property damage liability insurance?
Many states require that you maintain a minimum amount of auto insurance. This typically includes a minimum required level of property damage liability insurance. However, the amount you need to carry will vary depending on the state you live in and your personal rating factors. Talking to a licensed agent is often helpful when determining the level of coverage that is best suited to your needs.
What is not covered by property damage liability insurance?
Despite its name, property damage liability insurance does not include coverage for all property. Most notably, property damage liability insurance does not cover your own property or vehicle. To cover your own vehicle, you will need to file a claim under your collision or comprehensive coverage. If your personal belongings are damaged in an accident, you would need homeowners or renters insurance to cover them.