Property Damage Liability Insurance Guide

Property damage in an auto accident is considered to be damage done by or to a vehicle, including to stationary objects or structures, like fences and mailboxes. Property damage in an accident is typically covered by the at-fault driver's property damage liability insurance.

Liability insurance, which is required in almost every state, does not pay for the at-fault driver's own expenses, however. If you cause the accident, you can only have your vehicle repairs covered if you have collision insurance. To underscore the importance of these types of car insurance coverage, the average property damage claim was $3,841 for liability insurance in 2018 and $3,574 for collision coverage.

For more information, check out WalletHub's guide to property damage liability insurance.

Property damage liability insurance works by helping to cover property damage costs incurred by other people in accidents that you cause. Property damage liability insurance is usually combined with bodily injury liability insurance to create what is referred to simply as “liability insurance.”

Property damage liability insurance is a main component of car insurance, homeowners insurance, and business liability insurance. For car insurance, property damage liability insurance comes into play when someone is at fault for an accident and the victim files a claim with the at-fault driver's insurance. The at-fault driver's insurance will then pay for the victim's vehicle damage or even damage to stationary objects such as their house or fence. Liability insurance can also help to pay for legal fees if you are sued because of such an incident. 

How Property Damage Liability Insurance Limits Work 

Liability insurance policies are often described as either a combined single-limit policy or a split-limit policy. 

Combined single-limit policy: Your insurer offers a certain dollar amount of coverage per incident. How much goes towards property damage is determined by the nature of the incident.  

Split-limit policy: Your insurance company details how much it will pay for each coverage type. These policies are usually written as 25,000/50,000/20,000 or 25/50/20, for example. The first number is the limit your insurer covers per person, the second is the total limit per accident, and the third is the property damage limit.

So, in a 25/50/20 split-limit policy, your property damage liability insurance would cover the other person's vehicle or property damage up to $20,000. Anything beyond that, you may need to pay out of pocket or risk being sued for the rest.   

Example of How Property Damage Liability Insurance Works  

Here's an example of what might happen if your car insurance policy has liability limits of 25/50/20 and you cause an accident on the highway involving two other vehicles:

• Person 1's car is totaled, costing $20,000 in property damage.
• Person 2's car has $5,000 in property damage. 
• You would be responsible for none of Person 1's property damage.
• You would have to pay Person 2's $5,000 in property damage (because your policy only covers a total of $20,000 in property damage per incident). 

To learn more, check out WalletHub's guide to property damage liability insurance. 

Property damage liability insurance covers damage that you cause to another person's property when you are at fault in a car accident. For example, property damage liability insurance will help pay for damage to other people's cars, homes, offices, mailboxes, and more.

 What Property Damage Liability Insurance Covers

Your property damage liability insurance is only used when you are at fault. If another driver is at fault and your car or other property is damaged, their liability insurance will help pay for your expenses. However, if you are at fault, the only way to have insurance pay for your repairs is if you have collision coverage on your policy.

Property damage liability insurance is mandatory in most states, but the amount of coverage you are required to have varies from state to state. For example, California requires only $5,000 in coverage, whereas Texas requires $25,000 in coverage.

To learn more, check out WalletHub's guide to property damage liability insurance.

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.

You should have as much property damage coverage as you can comfortably afford, ideally enough to cover your assets in case you are sued after an accident. At the very least, you need to have your state's minimum required amount of property damage liability insurance if you cannot afford higher limits. 

State minimum requirements tend to be pretty low for property damage liability coverage since the average claim for property damage is only around $4,000. However, you should always consider the worst-case scenario when determining insurance limits. 

For example, a new car costs an average of $36,000. If you total someone's new car and you're only carrying $4,000 in property damage coverage, you will be responsible for the remaining $32,000. That driver can also sue you for that amount. Because of this, you should always carry enough liability insurance, both property damage and bodily injury, to cover your assets and prevent financial ruin if a serious accident occurs. 

So, if your net worth is $100,000, it's recommended that you purchase $100,000 in property damage liability coverage. If your net worth is higher than the limits available to you, you can supplement your liability insurance with an umbrella policy.

To learn more, check out WalletHub's guide to property damage liability insurance.

No, property damage liability insurance does not have a deductible. Property damage liability car insurance pays for other people's property damage after accidents that the policyholder causes, up to the limits of the policy, and it does not require the policyholder to pay anything out of pocket.

Although there isn't a property damage deductible, a property damage liability claim will cause a driver's rate to go up. On average, insurance rates go up by about 48% after an at-fault accident, depending on the extent of the damage.

To learn more, check out WalletHub's guides to car insurance deductibles and property damage liability insurance.

The difference between personal injury protection (PIP) and property damage liability insurance is what they each cover. PIP pays for the policyholder's medical bills after an accident, while property damage liability covers other people's property damage in accidents that the policyholder causes. Nearly all states require property damage liability insurance, but only 13 states require PIP.

Differences Between PIP and Property Damage Liability Insurance

Since property damage liability insurance is required in every state that requires you to buy car insurance, you don't have a choice on whether or not to purchase it. On the other hand, PIP is not required in most states. But if it's offered as an optional add-on, you should still consider getting it in order to protect yourself against hefty medical bills if you're seriously injured in a wreck. If your state does not offer PIP, then you can purchase medical payments coverage as an alternative, though it provides less protection.

To learn more, check out WalletHub's guides to personal injury protection and property damage liability insurance.

PLPD is shorthand for Personal Liability and Property Damage insurance. PLPD insurance covers injuries and property damage for the other driver if you are found to be at fault in a car accident but it does not reimburse you for your own medical expenses or damage to your own property, however.

The term PLPD is most commonly used in Michigan; it is known as “basic liability” in the rest of the nation. Because PLPD auto insurance is mandatory in almost every state, it is the most basic form of car insurance.

How PLPD Insurance Works

PLPD insurance is divided into two groups: personal liability (PL) and property damage (PD). 

How Personal Liability Insurance Works

Personal liability insurance covers medical costs for the victim of an accident. If you are the victim of a crash, the other driver's PLPD will cover your costs. If the other driver is the victim, your PLPD will cover theirs.

Also called “bodily injury” coverage, personal liability insurance is often referred to in a split numeric form—$15,000/$25,000, for example. The first number to appear—in this case, $15,000—is the most an insurance policy will pay per person for injury care after an accident. The second number ($25,000 here) refers to the maximum payout per separate accident. The minimum amount of personal liability insurance a motorist must purchase varies by state.

How Property Damage Insurance Works

Property damage insurance covers the physical damage to other objects caused by your vehicle. The PD portion of PLPD can cover damage to another car, as well as government or personal property. That can include street lamps, landscaping, lawn furniture, or signage.

Property damage insurance is usually listed after the two maximum payouts for personal liability. So, for example, if a policy offers $15,000/$25,000/$20,000, the PD coverage is a maximum of $20,000.

Does PLPD Insurance Cover Theft?

PLPD insurance does not cover theft, as this is considered damage that affects you, not another driver or owner of property you might have damaged with your vehicle. Instead, theft falls under what's known as comprehensive insurance, which addresses any repairs to your car which might take place outside of a collision. That includes hail damage, falling trees, vandalism, and theft. However, even comprehensive insurance will not cover the items stored in your car when it was stolen.

While PLPD does not cover theft, it does provide coverage in the event of an accident. As a result. if you are involved in an accident, and especially if the accident is your fault, the premiums for your PLPD insurance will likely rise. That means it's more important than ever to comparison shop for the best rates. Know what's required in your state, and compare quotes from several insurance companies.

You need enough liability insurance to cover the full value of your assets. Your bodily injury liability coverage should be as much as your net worth, while your property damage liability insurance can be slightly lower since property damage claims are usually less expensive. Purchasing enough liability insurance to cover the value of your assets protects you from financial ruin if you cause a serious car accident.

When to Carry Only the Minimum Liability Coverage

Although almost every state requires drivers to carry liability insurance, the minimum coverage is not always enough to cover the cost of an accident. It's always best to carry as much liability coverage as you can afford, especially if you have a high net worth.

If you don't have many assets or think the risk is worth it, you might be comfortable with carrying only the minimum coverage. But no matter what, make sure you're carrying enough insurance to comply with state law and avoid paying fines for driving uninsured.

Liability Limits on Auto Insurance

Liability limits on auto insurance are the maximum amount that your insurance company will pay for injuries and property damage in accidents that you cause. Liability limits are typically written as three numbers divided by slashes.

For example, Arizona's liability coverage requirements are 50/30/10. That means drivers need to carry $50,000 in bodily injury liability coverage per person, $30,000 in bodily injury liability coverage per accident, and $10,000 in property damage liability coverage overall.

Why You Need More Liability Insurance Than the State Minimum

Your insurance company will never pay for anything beyond the limits of your policy. Using the Arizona example, if you cause an accident that leads to $70,000 in medical bills for the other driver, you will have to pay for $40,000 if you are only carrying the minimum insurance required. And if you can't afford to pay the full amount, the other driver can sue, and you can have your assets seized or wages garnished to cover the remainder.

Your liability insurance does not cover your own car if someone hits you. The responsible driver's liability insurance will however cover any damages to your vehicle, because liability only pays for damages the policyholder causes to others and their property.

Liability car insurance is required in almost every state, and it comes in two forms: bodily injury liability and property damage liability. Bodily injury coverage pays for others' medical expenses, while property damage coverage pays to repair or replace property like cars, mailboxes, and fences.

If the driver who hits you is uninsured or unidentified, you can file a claim with your uninsured motorist or collision coverage. If you don't have these coverage types and cannot receive a payout from the at-fault driver, you will need to pay out of pocket for repairs.

For more information, check out WalletHub's complete guide to liability car insurance.