Property Damage Liability: What It Is and How It Works

You might see several types of car insurance coverage included in your policy. If you cause an accident that damages someone’s property, your property damage liability insurance will cover the costs, up to your policy limits.

Property damage liability covers damage to other cars, buildings and structures, like fences and telephone poles. However, property damage liability won’t cover injuries you cause in a crash. It also won’t pay for damage to your car — you’ll need comprehensive and collision coverage on your policy for those repair costs.

Here’s how property damage liability coverage works and how much you need.

What property damage liability covers

Property damage liability insurance covers damage to someone else’s property after a car accident you cause. It also covers damage caused by someone else driving your car with permission. More specifically, property damage liability pays for damage to:

• The other person’s car, including paying for any diminished, or reduced, value to the car as a result of the crash.

• Buildings and other structures, like lampposts and fences, including government property.

• Trees and other landscaping.

Property damage liability may also cover legal expenses if you’re sued.

How property damage liability works

Property damage liability insurance typically has a “per accident” limit and no deductible. This means the coverage pays out after an accident you cause, but only up to the amount stated in your policy. If you cause another accident, the coverage will, again, pay out up to that policy limit.

If you damage someone else’s property while driving, provide your insurance information to the property owner. They can contact your insurance company to start the claims process. Your insurer will work with the other party to assess the damage and pay for repairs, up to your policy’s property damage liability limits. Because of the claim, you will likely see your rates increase at your next policy renewal.

Liability insurance is typically represented in three numbers on a policy, like “25/50/10.” The first two numbers represent how much bodily injury coverage you have per person and per accident, respectively, while the third is the policy’s property damage liability limit.

Let’s say your car insurance policy has a property damage liability limit of $10,000. While driving, you rear-end a car at a red light and cause $4,500 in damage to the other driver’s vehicle. Your insurer would cover all of the repair costs because the total is lower than your policy’s property damage liability limit.

But if that accident caused $10,500 in damage to another person’s car and property, your insurer would only pay up to your policy’s property damage liability limit. So for this example, your insurance would cover $10,000 of the repair costs and you would be responsible for the remaining $500.

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How much property damage liability you need

Most states, with the exception of Virginia and some areas in Alaska, require all drivers to have a minimum amount of property damage liability coverage. Liability-only car insurance is the cheapest option for drivers, but it is also the bare minimum you need to legally drive.

Unfortunately, state-mandated car insurance minimums may not be enough to fully cover all property damage you might cause. And drivers with a high net worth could face large financial losses if they’re held responsible for damages above their liability insurance limits.

Ideally, you’d have enough property damage liability coverage on your policy that you don’t need to pay out of pocket if you cause an accident. The average cost of damage from a crash in which there is only property damage is $5,700 per vehicle, according to the most recent data from the National Safety Council . But damage can far exceed that amount in a major crash, especially if you crash into a newer, expensive vehicle, like a sports or luxury car.

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