Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Oct 13, 2021

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Insurance can be difficult to grasp. Many of the terms used to express coverage sound similar but have completely different meanings.

For example, property damage liability and physical damage coverage are two of the most commonly misunderstood and confused types of coverage.

While they almost sound exactly the same on the surface, the difference between property damage liability vs. physical damage coverage is vast and often mixed up by consumers.

Is property damage insurance liability coverage?

The easiest way to clear things up is to state that property damage insurance is a type of liability coverage.

And liability insurance coverage always refers to damages to another person’s vehicle, property, and/or belongings that results from an automobile accident you caused.

All states require drivers to carry at least a mandatory minimum car insurance policy that includes this coverage. States’ minimum insurance requirements generally include property damage liability coverage and bodily injury liability coverage. However, the mandatory minimum coverage limits differ from state to state.

Property damage liability insurance is part of a car insurance policy and it typically covers the cost of repairs if you are at fault for an auto accident that damages another vehicle or property. Property damage liability insurance does not cover damage to your own vehicle. For this cause, you may want to consider another coverage type such as collision coverage or comprehensive insurance to cover the repair cost to your own vehicle or property.

Much like bodily injury liability insurance, property damage coverage operates on a per accident basis.

The liability limits on your insurance policy are typically expressed in the following manner: 250/100/25.

Your policy’s property damage coverage limit is represented by the third number in the series, in this case “25.”

This means your insurance company will pay up to $25,000 for damage to other people’s property that you cause for one accident.

This is regardless of how many cars you damage. The other two numbers in the series above are explained here (auto insurance liability limits).

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What does physical damage refer to?

On the other hand, physical damage coverage refers to damage to your own vehicle.

It is further broken down into two sub-categories, including collision insurance and comprehensive coverage. So, physical damage is a general term for collision coverage and comprehensive coverage.

Collision insurance provides protection for your vehicle if it’s damaged in an accident or collides with another object, overturns or rolls. Comprehensive insurance provides protection for your vehicle if it’s damaged by anything else other than a collision or if your vehicle is stolen.

Another way to differentiate is that this type of coverage is not mandatory according to state law.

However, you are typically required to carry this coverage on a vehicle if it’s leased or you owe money on an auto loan you took out to pay for the vehicle.

Anyone who owns the car while you are financing/leasing it, referred to as the loss payee, or lienholder, will require this coverage be purchased in order to protect their interest in the car.

Their concern is that their loan/lease won’t be repaid if a car is totaled and no longer drivable.

Contact your independent agent or insurance company if you have questions or are unhappy with your current auto insurance policy coverage or rate.