Property Damage Liability Car Insurance Coverage: How Does It Work? 


So you bought yourself your dream car or just a car that gets you from point A to B. Of course, you’ve spent a lot of money on it, but sadly the spending spree has not stopped yet. Apart from the constant and painful payments for gas, you still have to pay for the auto insurance that is mandatory in almost every state in the US.

One part of this mandatory liability insurance coverage is property damage liability insurance. What is it, what does it cover, and how does it work? Here’s a detailed explanation for all the three commonly asked questions, along with the minimum coverage requirements from some states. Let’s get started.

What is Property Damage Liability Car Insurance

Every state in the US (except one) has mandatory requirements for drivers to have liability insurance coverage. This auto insurance policy is not for your car, but for the car/person/property that you might hit and damage/hurt in the case of an accident.

For example, if you hurt someone’s car, it is you who’s liable to pay for the repairs. But what if you don’t have the money to pay for it? This is why liability insurance is mandatory.

Liability insurance is a combination of three different types of coverage, each section written and represented with a numerical amount.

Components of Liability Insurance

There are three components of liability insurance, each covering a different type of damage. Liability insurance coverage is represented with three numbers, for example, 50/100/25. These numbers represent the amount of money (in thousands of dollars) allotted for the coverage for injuries and damages.

The first part of this series of numbers represents the coverage limit for injury costs per person in an accident. The second amount reflects the coverage limit for the total amount of personal injury coverage per accident. The third number is the coverage limit for property damage.

The example here is a conservative amount. Most people opt for liability coverage sufficient enough to manage large settlement claims. So the usual figure is around 100/300/50. These days, you can choose even the cheapest carrier for auto insurance and get great property damage coverage.

How Does it Work

In the case of an accident, where you are at fault, your liability coverage will be used to cover the cost of damage to the other person’s property. It is important to have more than the minimum coverage limit.

So let’s say you hit someone’s car, or maybe drove into someone’s backyard and destroyed some parts of their house. All these repairs will be covered using your property damage coverage, which is the last amount in that series of numbers. In most states, the minimum property damage coverage is around $20,000 to $25,000.

But fixing up a mailbox or repairing a wall does not cost $25,000. So why is it that the government has set such a high amount as the minimum coverage for property damage? Not just that, many insurance companies offer a property damage coverage of $50,000. Why such high amounts?

Other than property damage, this amount can also be used for other settlements. Since you do not intentionally cause a car accident, you never know what damage will be caused. In case your car hits a shop, then the property damage coverage will cover all the loss of business until the business is fixed.

So in summary, property damage coverage covers the cost of:

  • Damage to the property, which includes repairs and labor charges
  • Damage to a business, and the loss incurred during the time of repair
  • Court and attorney fees and expenses, depending on the type of insurance you have.
  • Other additional damages.

If the amount of property damage coverage is not adequate to cover the costs of repairs, then the remaining amount shall be paid from your pocket. This is why it is advised to keep the property damage coverage amount a little higher than the minimum limit.

Minimum Coverage for Property Damage is the Various States

Here’s a table showing the minimum mandatory coverage for property damage liability insurance. This is not an exhaustive list.

State Minimum Property Damage Coverage
California $5,000
Arkansas $25,000
Nevada $20,000
Montana $20,000
New Mexico $10,000
Colorado $15,000
Alaska $25,000
Alabama $25,000
New York $10,000
Hawaii $10,000
Florida $10,000
Oregon $20,000

Liability vs Collision

A confusion that may spring is the difference between liability coverage and collision coverage, as these two are very similar in cost and function. Both liability coverage and collision coverage are used to cover the damages during an accident, and both of these insurance coverage cover vehicle damage.

The main difference here is liability coverage is for the person or the property that you caused the injury/damage, whereas collision coverage is to cover all the damage caused to your car in an accident caused by you.

Filing a Claim

Since you are not covered by property damage liability coverage, you cannot file a claim for this insurance. In the case of an accident where the other car or property has been damaged, the other person will file a claim against your liability coverage policy.

If you are the person whose car or property has been damaged, and the person at fault does not have enough coverage amount, you can use your collision coverage to cover the extra cost. To prevent such situations (where the person at fault does not have enough coverage), many states have also mandated uninsured/underinsured coverage.