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

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

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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 damage 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 ensure 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:

  • Repairs for damage caused to the other party's vehicle, including auto body shop labor or replacement parts
  • Fixing up damage or destruction to other businesses, houses, fences, lampposts, mailboxes, etc.
  • Attorney, court and other legal defense fees incurred for the property damage claim (depending on your terms and conditions)
  • Lost income from a business closure that your accident was deemed to cause
  • Other recurring expenses from that damage

Each state sets its own minimum limits for property damage coverage:

State
Minimum coverage
State
Minimum coverage
Alabama$25,000Montana$20,000
Alaska$25,000Nebraska$25,000
Arizona$10,000Nevada$20,000
Arkansas$25,000New Hampshire$25,000
California$5,000New Jersey$5,000
Colorado$15,000New Mexico$10,000
Connecticut$25,000New York$10,000
Delaware$10,000North Carolina$25,000
District of Columbia$10,000North Dakota$25,000
Florida$10,000Ohio$25,000
Georgia$25,000Oklahoma$50,000
Hawaii$10,000Oregon$20,000
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How much does property damage liability insurance coverage cost?

Typical liability limits for property damage coverage range from $5,000 to $100,000, and are 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 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.

Coverage limit
Property damage premium (six months)
$10,000$68.20
$15,000$68.80
$20,000$69.50
$25,000$70.10
$50,000$71.40
$100,000$73.30

Doubling or tripling your coverage limit does not lead to a corresponding increase in your premiums. The company we obtained quotes from for our example only charges about 1.07 times the rate of the lowest limit for an increase to the highest limit.

So going from a $10,000 to $100,000 coverage limit only increases property damage premiums by about $5 per year. This holds true regardless of the driver's background and what kind of car (economy or luxury) the policyholder is insuring with our example company.

How much property damage liability insurance should you carry?

The average property damage claim is generally a few thousand dollars, meaning that unlike with other types of insurance, you may not need to carry that much. However, you may opt for higher limits to ensure that you are sufficiently protected in the event of an accident.

In 2010, the average property damage claim was $2,881. Over the last ten years, however, the average claim amount has nearly doubled. Nonetheless, these amounts are lower than the minimum amount in every state. As mentioned above, however, getting more coverage, just to be extra careful, is relatively inexpensive and can provide additional support following an accident that results in costly car damage.

The data below from the Insurance Information Institute shows how average property damage claims have risen between 2010 and 2019.

Year
Average property damage claim
2010$2,881
2011$2,958
2012$3,073
2013$3,231
2014$3,516
2015$3,791
2016$3,969
2017$4,064
2018$4,295
2019$4,525

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 a 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 amount. 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 property damage insurance, you can use your collision insurance to cover the rest. Though we would recommend having collision insurance, it is optional and usually expensive to carry.

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