What is Property Damage Liability Coverage?
One of the major downsides of owning and operating a vehicle is the associated liability. For our purposes, this refers to damage you cause to another person’s vehicle, property, and/or belongings as a result of your negligence while driving a car (not damage to your own vehicle). Basically any accident you are found to be “at fault” for causing will make you liable for the damages.
“Property damage liability coverage” is part of compulsory, or mandatory, liability insurance coverage. Each State Department of Insurance sets their own minimum liability limit requirement.
The liability limits on your insurance policy are typically expressed in the following three number format: 50/100/25. The third number in the series, in this example “25”, represents the property damage liability limit.
This means your insurance company will pay up to $25,000 in the event of any one accident you are found liable for, regardless of how many cars (or property) are damaged.
That’s right, it doesn’t matter how many cars are involved in the accident. The maximum amount paid by the insurance company will be $25,000. If the total cost of all the damages caused by you is under the property damage liability limit on your policy, you won’t have any problems.
Conversely, you’ll be on the hook if the dollar amount of damage exceeds your policy limit. This is the main reason why you should carry the highest liability limits your budget will allow (I am referring to your budget before you subtract your daily Starbucks run).
Property damage differs from and is NOT INCLUDED in your policy’s physical damage coverage limit, which is designed to cover damage to your own car. The difference between the two is explained here (property damage vs physical damage). But in a nutshell, physical damage is purchased for your own vehicle and is optional (not a state law), assuming you don’t have an obligation to a financing company.
If you have an outstanding loan on your vehicle or you lease, your lending institution will require that you carry physical damage coverage to protect their financial interest in the vehicle.
Contact your insurer or independent agent if you’re unclear or unsatisfied with your current policy’s property damage liability limits.
