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Property damage liability definition: Auto insurance coverage that pays for damage to another person’s property if you’re at fault in an accident.
Most states require a minimum amount of property damage liability coverage.
Buying more than your state’s requirements offers more financial protection.
Property damage liability insurance pays for the damage you cause to someone else’s property in a car accident. The insurance covers damage to other cars, buildings and structures, like fences and telephone poles. It can also cover legal fees if you’re sued for the same types of damage.
However, property damage liability won’t cover injuries you cause in a crash. It also won’t pay for damage to your car, so you’ll need comprehensive and collision coverage on your policy for repair costs.
Looking to cover your own expenses after a crash? Read our guide on types of car insurance coverage to find out what you need.
Here’s how this coverage works and how much you need.
What property damage liability covers
Property damage liability insurance pays for damage to someone else’s property after a car accident you, or someone driving your car with permission, cause. It pays for:
The other person’s car, including paying for any diminished, or reduced, value to the car as a result of the crash.
Buildings and other structures, like lampposts and fences, including government property.
It also may cover legal expenses if you’re sued and the cost of a rental car for the other driver if theirs is being repaired.
How property damage liability works
Property damage liability insurance typically has a “per accident” limit and no deductible. This means the coverage pays out up to the amount stated in your policy after an accident you cause. If you cause another accident, the coverage will, again, pay out up to that policy limit.
If you damage someone else’s property while driving, provide your insurance information to the property owner. They can contact your insurance company to start the claims process. Your insurer will work with the other party to assess the damage and pay for repairs, up to your policy’s property damage liability limits. You will likely see your rates increase because of the claim at your next policy renewal.
Property damage liability is one part of a policy’s total liability insurance. This is usually represented in three numbers, like “25/50/10.” The first two numbers represent how much bodily injury coverage you have per person and per accident, respectively, while the third is the policy’s property damage liability limit.
As an example, say you accidentally rear-end a car at a red light and cause $4,500 in damage. If your property damage liability limit is $10,000, your insurer will cover the entire cost because it’s less than your limit.
Here’s another example: You’re leaving a friend’s home and start your car, which is parked in their driveway. You accidentally put the car into drive instead of reverse and ram through their garage door, causing $10,500 in damage to their garage and car parked inside. Your auto insurance includes $10,000 in property damage liability coverage. Your insurer pays for the garage and car to be fixed, and you’re left on the hook for the remaining $500.
» MORE: Liability Insurance Definition
How much property damage liability you need
Most states, with the exception of New Hampshire, Virginia and some areas in Alaska, require drivers to have a minimum amount of property damage liability coverage. But state-mandated car insurance minimums may not be enough to fully cover all property damage you might cause. Also, drivers with a high net worth could be held responsible for amounts much higher than state-mandated minimums.
Ideally, you’d buy enough property damage liability coverage that you don’t need to pay out of pocket if you cause an accident. The average cost of damage from a crash in which there is only property damage is $4,700, according to the most recent data from the National Safety Council. But damage can far exceed that amount in a major crash, especially if you crash into a newer, expensive vehicle, like a sports or luxury car.
» MORE: Compare auto insurance rates