Property Damage Liability Car Insurance: What Is It? How Does It Work?

Property damage liability insurance is one of the major coverage types that drivers are required to have by law. This insurance covers the cost of damages caused to others -- whether you damaged their car, house or any other type of personal property.

What Is Property Damage Car Insurance and What Does It Cover?

Property damage insurance covers you for any financial liability that occurs should you get into an accident and cause damage to someone else's property. Coverage for your own property falls under comprehensive and collision coverage which you pay for separately. Like bodily injury coverage, property damage coverage helps to insure that any driver will be able to assume some financial responsibility for damage caused in an accident where they are deemed at fault. This type of coverage operates on a per accident basis, with the insurance company willing to cover costs up to the amount of your coverage.

Examples of what is covered:

Each state sets its own minimums as to the limits you need to have when it comes to property damage coverage:

How Much Does Property Damage Liability Insurance Cost?

Typical liability limits for property damage coverage range from $5,000 to $100,000, and is based in part on what options auto insurance companies offer to their prospective policyholders. With higher coverage limits, you can expect to have higher premiums. The following table illustrates the property damage related premiums at different coverage limits for a sample car and driver profile. In this case, we used a 2014 Toyota Camry for a driver in New York.

Doubling or tripling your coverage limits does not lead to a corresponding increase in your premiums. The company we obtained quotes from for our example only charges 1.07x for an increase in base property damage premiums from the lowest limit to the highest limit. So going from a $10,000 to $100,000 coverage limit only increases property damage premiums by 7%, or $12 a year. This holds true regardless of what kind of car (economy or luxury) that the policyholder is insuring with our example company, and what the driver's background is.

How Much Property Damage Liability Insurance Should You Carry?

The average property damage claim is generally less than a few thousand dollars, meaning unlike other types of insurance, you actually don't need to carry that much. In 2013, the average property damage claim was $3,231. Since 2013, the average claim has most likely gone up, per the trend since 2004. Nonetheless, having at least the state minimum should suffice. As we mention above however, getting extra coverage, just to be extra careful, will be relatively inexpensive. The data below from III shows how average property damage claims have risen between 2004 and 2013.

How Do You File a Property Damage Liability Claim?

Since property damage insurance covers damage you cause to someone else's property, you will never be the one to make claims against your own policy. Instead, property damage claims are generally filed as third party car insurance claims, where you or another person make an insurance claim against the insurance policy of the person at fault. The limits on the property damage coverage dictate the maximum the insurance company is willing to pay out as the result of any single accident. If the damage caused by the accident exceeds the amount of coverage, then the person making the claim can go after the policyholder directly to recover the excess amounts. This may include being sued in a civil court to make up the difference.

If you are found mostly at-fault in the accident, and cannot recoup enough money from another driver's PD insurance, you would be able to use your collision insurance to cover the rest. Though we would recommend having collision insurance, it is optional and usually expensive to carry.