Property Damage Liability vs Physical Damage Coverage

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

Property damage liability and physical damage coverage are two of the most commonly misunderstood and confused coverage types. The difference between the two is vast, but often mixed up.

Property damage is a type of liability coverage. Liability coverage always refers to damages to another’s vehicle, property, and/or belongings that results from an accident you caused.

All states require drivers to carry at least a mandatory minimum car insurance policy. The liability limits on your insurance policy are typically expressed in the following manner: 250/100/25. Your policy’s property damage limit is represented by the third number in the series, in this case “25.”


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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).

Physical damage coverage, on the other hand, refers to damage to your own vehicle. Physical damage insurance is further broken down into collision insurance and comprehensive coverage.

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 a 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 policy coverage or rate.

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One Comment

  1. Mark Stuber July 24, 2017 at 5:24 pm -

    I could be wrong however, I think there is an exception to “Physical damage coverage, on the other hand, refers to damage to your own vehicle,” at least in Georgia.

    I believe UM “Property Damage” can apply to your vehicle when an uninsured or unknown (i.e. hit and run) driver is liable.

    Am I correct?

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