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You need at least the minimum amount of property damage liability coverage required in your state, for starters. But because many states have low minimum insurance requirements, it’s advisable to get as much coverage as you can afford, and to purchase limits that are equal to your net worth at the very least. Property damage liability pays for damage to other people’s property after you are at-fault in an accident, so you will be financially responsible for any expenses beyond your policy limits.
The average property damage liability claim is around $4,000, but it’s best to consider a worst-case scenario when deciding on your coverage limits. For example, a new car costs nearly $36,000 on average. So if you total someone else’s new car but are only carrying $4,000 in property damage coverage, you will be personally responsible for $32,000. The not-at-fault party can sue you for this sum, and in some states your wages can even be garnished.
Because of the risk posed by expensive accidents, you should also consider your assets when choosing policy limits. For instance, if your net worth is $100,000, it’s recommended that you purchase $100,000 in property damage liability coverage. Otherwise, the other driver might be able to take your assets in a lawsuit. And if your net worth is particularly high, you can supplement these limits with an umbrella policy.
On the other hand, if your net worth is low, you are less likely to be sued for damages. In this case, it might be worth choosing lower coverage limits in return for lower premiums. However, purchasing higher limits is not that much more expensive than buying the minimum coverage, and the benefits can be well worth it down the road.
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