Property Damage Liability Insurance Guide

Property damage liability insurance is the type of insurance that covers damage that you do to other people's property. Property damage liability insurance can pay to repair damage to other people's cars, homes, fences, buildings and more – up to your preset coverage limit.

Property damage liability insurance costs an average of $1,407 per year when purchased as part of a minimum coverage policy.

Key Things to Know About Property Damage Liability Insurance

• It's required in almost every state. Almost every state includes property damage liability insurance in its minimum coverage requirements. Only Virginia and New Hampshire do not require drivers to carry it, but other financial requirements must be met instead.

• It will only pay for damage up to the limit you've purchased. When selecting your policy, you will have to choose your property damage liability limit. The limits that states require range from $5,000 to $25,000 in coverage. It is important to choose a coverage limit that is appropriate for your needs. Keep in mind that if you are responsible for an accident and your limit is not high enough to cover all accident-related costs, you will be responsible for paying for the remaining damage out of pocket.

• It does not cover your own property. Property damage liability insurance is a form of third-party coverage, which means that it covers damage to another person's property that you are responsible for. It does not cover damage to your own property or injuries that you or your passengers may sustain in an accident.

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

Property damage liability insurance is the part of a car insurance policy that helps pay to repair damage you cause to another person's property. It will typically cover repairs to other people's vehicles or to property like fences, mailboxes, or buildings – up to the policy limit set by your insurer. Your policy limit is the amount your insurer agrees to pay per incident, beyond which you need to pay out of pocket.

Property Damage Liability Insurance Covers Damage To:

• Houses
• Vehicles
• Offices
• Businesses
• Mailboxes, fences, and flag poles

Property damage liability insurance does not cover damage to your own vehicle. If you want to protect against damage to your own vehicle, you need collision or comprehensive insurance.

Every state requires a certain minimum level of property damage liability coverage. However, these minimums vary from state to state. If you want to learn more about what your state requires, check out WalletHub's property damage liability insurance guide.

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.

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.

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.

Property damage liability insurance is important because it protects drivers from being held financially responsible for other people's damaged property, such as their vehicle or home, after a car accident caused by the policyholder. Property damage liability insurance is also required in most states. Without it, you could face penalties for driving without insurance.

Why Property Damage Liability Insurance is Important

It covers potentially financially crippling repairs.

Property damage repairs could be incredibly expensive. For example, a new car costs around $36,000 on average, and if you total someone's brand-new vehicle without having property damage liability coverage, you could be held financially responsible for that cost. Damage you cause to other drivers' vehicles or to stationary objects, such as houses and fences, is covered by PD.

It is required in almost every state.

You are required to have a minimum amount of property damage liability insurance in almost every state. If you are caught driving without your state's minimum insurance requirements, you may face penalties including hefty fines, license and registration suspension, or mandatory SR-22 filing.

It protects you from lawsuits.

If you cause a car accident that damages other drivers' property, your property damage liability insurance will cover the repairs up to your policy limit. This reduces the chances of other drivers suing you for compensation.

It stops your insurance rates from increasing.

Insurance companies like to see that you have maintained continuous coverage. A lapse in coverage may label you as a high-risk driver and result in more expensive premiums. Having your state's minimum coverage, including property damage liability insurance where applicable, will prevent a lapse in coverage.

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

The difference between property damage car insurance and collision insurance is whose property gets covered. Property damage liability insurance (PD) pays for repairs to other people's property after it's damaged in an accident you cause, while collision insurance pays to repair or replace your vehicle after an accident.

You can file a property damage liability claim with the at-fault driver's insurer after an accident, and if you were at fault, the involved drivers will file a PD claim with your insurer. Unlike property damage insurance, collision insurance does not depend on who was at fault for the car accident. You can even use it after filing a property damage claim if the at-fault driver's limits are not high enough to pay for all the repairs your vehicle needs.

Property Damage vs. Collision Insurance

Property damage liability insurance is included in almost every policy that meets state minimum coverage requirements. On the other hand, collision insurance is not required by any state's laws and can typically only be purchased alongside comprehensive insurance. However, you may be required to have collision insurance by your lender or lessor if your car is financed.

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

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 deductible for property damage liability insurance, a 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.

Yes, car insurance covers damage on private property, although it's harder to determine fault after accidents on private property because the property owner may be partially responsible. If the private property owner shares fault, then their liability insurance will help cover the cost of repairs.

Private property is land or objects that are legally owned by a specific non-governmental entity such as a company or an individual. Examples include homes, as well as certain roads, driveways, parking garages, and parking lots. Determining fault after an accident on private property depends on whether your state uses contributory or comparative negligence.

Most U.S. states use comparative negligence, which means that anyone involved in a car accident is responsible for the cost of the damage proportional to their share of the blame in the crash. With a contributory negligence system, drivers cannot collect any damages after an accident if they were even partially at fault.

Key Things to Know About Car Insurance Coverage and Private Property

• The property owner can share blame. If the car accident was a result of hazardous conditions on someone's private property and the owner of the property had not attempted to fix it or put up proper warning signs, then the property owner can be deemed partially or entirely at fault for the crash. This means the property owner's liability insurance will have to cover part, or all, of the cost of repairs. However, if there was proper signage about hazardous conditions, or if you were trespassing on private property when the accident occurred, the private property owner is unlikely to be held liable for any damages.

• The at-fault driver's car insurance will pay. If the private property where the accident occurred is not deemed hazardous by insurance adjusters, then the at-fault driver's property damage liability insurance will cover the cost of repairs to the property if it was damaged. If only the at-fault driver's car was damaged, the driver would have to pay to repair their vehicle out of pocket. If someone was injured by the car accident, the driver's bodily injury liability insurance would cover the medical expenses.

• The property owner may have to use their own insurance. If the at-fault driver's property damage liability limits are not high enough to cover the cost of repairs, or they were driving without insurance, the private property owner could use their own insurance to cover the damage. For instance, if a car accident damages a commercial building owned by a private party, the building owner could use their commercial property insurance to cover repairs. If the accident damaged someone's home, the owner could use their homeowners insurance coverage.

To learn more, check out WalletHub's guide to what is covered by car insurance.