Is Property Damage Liability the Best Coverage for You?
TLTR: This article explores how property damage liability can benefit you and your business in times of peril. Learn about its inner workings, coverage, costs, and advantages.
In this blog
What is Property Damage Liability?
Property damage liability is part of your car insurance policy. It covers the repair costs of any damage resulting from an accident you cause to another person’s vehicle or property. (It will not, however, cover the repairs or damage to your vehicle or property.) As per NerdWallet, this coverage is a mandatory policy in many states.
Also known as PL, this form of auto insurance coverage protects you against being responsible for paying for damages caused by yourself (or members of your family) while driving a car, truck, or another vehicle.
Furthermore, it also protects you from legal liability for harm and damage to other cars or property caused by an accident you are involved in. You pay a premium on this form of insurance when you purchase your auto insurance policy. Usually, it’s a relatively small amount.
Note: This coverage doesn’t fall under collision and comprehensive coverage. The latter two cover damage to your car or property in the event of an accident.
What Does It Cover?
Primarily, property damage liability insurance covers:
- Damages to other vehicles due to the actions of the insured
- Damages to any property besides the vehicle of the affected
Additionally, property damage liability insurance provides coverage when you are injured in an accident, and someone else is at fault. So, if your medical bills get too high, this type of coverage can help pay for the cost of any treatments or surgery that you may need.
As a general rule, property damage liability only pays out to repair another person’s vehicle when total losses reach a certain dollar amount. It’s possible that paying a higher premium would allow you more coverage for less money overall. Therefore, the worth of your own auto insurance policy shouldn’t be based solely on its damage liability coverage.
Be sure to choose a company that provides great rates and reliable customer service in addition to the legal damage liability insurance you need for your car, truck, or other vehicles.
Inner Workings of Property Damage Liability Insurance
Liability insurance in general is offered in two ways: single combined limit and split limit. This holds true for property damage liability insurance as well.
Single combined limits offer you a set amount of coverage. This coverage will pay for bodily injuries and property damage. So, the amount you wish to allocate for each of these is entirely up to you.
Split limit policies offer you a coverage amount that is set by your insurer. The insurer determines how much the policy will pay for bodily injuries and property damage in an accident.
Types of Property Damage Liability
It’s always a good idea to have a firm understanding of your auto insurance policies. After all, that’s the only way to know how much you need to keep, or if there are areas that you can trim down to save a few bucks.
There are two commonly known types of property damage liability insurance. These are actual cash value and stated value policies.
Actual cash value insurance covers damages by taking the difference between what it costs to repair your vehicle or property minus the depreciation of the damaged or stolen asset at time of loss.
On the other hand, stated value insurance reimburses you for replacing the damaged property with new parts no matter how much the part depreciates over time.
Besides these, there is also summary property damage liability. This can pay out big-time if you find yourself involved in an accident where repair costs exceed your deductible amount.
Remember that this type of policy can act as another layer of protection from those who may not have cheap full coverage insurance for their vehicle.
Cost of Property Damage Liability Insurance
How much you pay for property damage liability coverage depends on several factors, including where you live and the value of your vehicle. So, if you have an expensive car, the cost of your liability insurance will be similar to the cost of collision coverage.
Furthermore, the amount you need also depends on how much money you’re willing to risk losing in a lawsuit if your negligence results in a person’s injury.
The overall cost of your property damage liability insurance increases along with your coverage limits. As per Value Penguin, the average minimum coverage requirements per state range from $5,000 to $25,000. Based on these coverage limits, the premium for six months averages from $68 to $73 per month.
Property Damage Liability Insurance for Businesses
Businesses are responsible for any property damage their employees cause while working or by other permitted people on the premises. This liability can also apply when your employees are out driving a company vehicle. According to the FMCSA, 166,250 vehicles were involved in traffic accidents with more than 4,500 fatalities in 2020. In the same year, over 75,000 road-related injuries were reported.
Looking at the numbers, you could potentially be liable for significant damages that you or your employees cause while driving. So, there’s no question that you need good auto insurance and property damage liability coverage for your business vehicles. As a result, the only question is what level of protection to buy.
In such cases, it’s essential to understand your commercial property insurance or commercial car insurance policies and what kind of additional property damage insurance you might need for your business. Simple research and calculation on your part can help determine this. However, keep in mind that not all business needs are the same. Not every standard commercial policy will apply to every business out there.
If you’re not sure about your current policy, talk to an auto insurance agent who’s familiar with property damage liability and any other types of coverage that might be useful for your business.
Note: Commercial umbrella insurance can offer you complete protection at the lowest cost if you have a small business with limited assets.
How To Find the Right Type of Property Damage Liability Coverage?
Suppose the cost of purchasing property damage liability on your car insurance is higher than you’d like. It is important to remember that you can purchase this type of auto insurance without buying an entire car insurance policy from a single provider. When shopping for coverage such as this, you can always call multiple companies. Ask them for quotes online and over the phone. If you know what kind of coverage you need, compare costs and benefits between at least three different providers. Choose the one that gives you the best deal.
When comparing property damage liability insurance policies, look at the costs of both your standard policy and any extras. Coverage for further property losses can help lower your overall premiums. Especially if you have expensive items that could suffer damage in an accident, even if it’s your own fault.
If you think this type of coverage will benefit you in the long run, talk to an insurance agent. Consult with them about adding a damage liability policy to your existing car, truck, or other vehicle insurance before deciding on another provider. Keep in mind what kind of policies work best with your current situation. That way you can get the most out of every dollar you spend on insuring your vehicles.
Understanding your insurance needs is crucial for figuring out how much coverage to get. You’ll be able to decide whether it’s worth spending extra money on optional coverage such as collision insurance. If you don’t know enough about the coverage, call different companies and ask for quotes to compare.
It’s also possible to get property damage liability without purchasing an entire auto insurance policy from one provider if this type of coverage is too expensive by itself. Before choosing a company that offers this liability coverage with their full policy, shop around for prices and reasons why each option could be better than the last. But remember that price should only be one factor you consider when making a final decision.
Did you find this blog helpful? Do let us know your thoughts in the comments below.
Are you looking for an insurance professional to understand such coverages better? Feel free to browse our insurance directory to find the right agent for you.
Frequently Asked Questions (FAQ)
When Are Property Damage Settlements Tax-Free?
Property damages payments are usually tax-free if the amount paid is for damage to property that doesn’t belong to you.
However, property damage payments may not be tax-free if they’re only for damaged property that you own.
What Types of Auto Liability Are There?
There are two types of auto liability coverage: property damage liability and bodily liability.
As their names suggest, bodily liability covers any bodily injuries caused by you to another individual in an accident, while property damage liability coverage takes care of the repairs to the damage sustained by vehicles other than your own.
Always consider your situation and consult with an insurance agent to make sure you get the right coverage.
Is Property Damage Liability Insurance Mandatory?
In many areas of the U.S., if you don’t have property damage liability coverage on your car insurance, your registration may be revoked. Worse still, you could face criminal charges for driving without it. If this is the case where you live, contact your local DMV to find out more about the laws regarding property damage liability insurance. Also, if your car or truck is not registered, it is illegal to drive it within the borders of most states.
If you live in an area where property damage liability insurance isn’t required by law, it may be a good idea to consider purchasing a policy anyway. Not only does coverage for property damage on your car insurance protect you from lawsuits in an accident, it also protects you for any resulting injury.
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