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 of 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 cost of any damage from an accident you cause to another person’s vehicle or property. As per the Department of State, this coverage is a mandatory insurance policy in many states.

This insurance coverage will cover the damages you (as the policyholder) cause to another person involved in an accident. It will not cover the repairs or damage to your vehicle or property in the event of an accident.

Also known by some people as PL, property damage liability is an essential part of your auto insurance policy. While it doesn’t cover damage done to your car, this form of auto insurance coverage does protect 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, property damage liability protects you from legal liability for harm and damage to other cars and 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: Property damage liability doesn’t fall under collision and comprehensive coverages. The latter two cover damages to your car or property in the event of an accident.

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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 get hurt in an accident, and someone else is at fault. If your medical bills get too high, this type of coverage can help pay for the cost of any treatments or surgeries that you need.

While property damage liability doesn’t cover the car repairs themselves, it does pay up to a certain amount for damages caused by yourself and family members while driving.

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. The worth of your own auto insurance policy shouldn’t be based solely on its property damage liability coverage.

Choose a company that provides great rates and reliable customer service in addition to the legal property damage liability insurance you need for your car, truck or other vehicles.

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Inner Workings of Property Damage Liability Insurance

Generally, liability insurance 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. How much you wish to allocate for each of these is entirely up to you. 

Split limit policies offer you a coverage amount that your insurer sets. The insurer is in charge of how much the policy will pay for bodily injuries and property damage in an accident. 

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Types of Property Damage Liability

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. It also takes into consideration the depreciation of a part damaged in an accident.

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. Another form of protection for your auto insurance policy can pay up big if you find yourself involved in an accident where repair costs exceed your deductible amount. It’s always a good idea to have a firm understanding of your auto insurance policies. Why? Because it’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.

This type of policy is advantageous if you live in an area with minimal or no traffic laws. It can act as another layer of protection from those who may not have cheap full coverage insurance for their vehicle.

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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. If you have a high-end car, the cost of your damage liability insurance will be similar to the cost of collision coverage.

The amount you need depends on the value of the car and how much money you’re willing to risk losing in a lawsuit if your negligence results in a person’s injury. Changes to this kind of policy depend entirely upon what state you live in; so, it’s important to check with your local DMV about requirements within your area before choosing a car insurance company.

Furthermore, the overall cost of your property damage liability insurance will increase if your coverage limits are higher. As per Value Penguin, the average minimum coverage requirements per state ranges from $5,000 to $25,000. Based on these coverage limits, the premium for six months averages from $68 to $73 per month.

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Property Damage Liability Insurance for Businesses

Businesses are responsible for any property damage their employees cause or by other permitted people on the premises. This liability can also be present when your employees are out while driving the company vehicle. According to the FMCSA, 166,250 vehicles were involved in traffic accidents, and over 4,500 fatalities in 2020. In the same year, over 75,000 road-related injuries were reported.

With such numbers, you could potentially be liable for significant damages you or your employees cause while driving. So, there is no question that you need a good auto insurance and property damage liability coverage on your business vehicles. The only caveat 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. But do keep in mind that not all business needs are the same. So, 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 coverages that might be useful for your business.

NoteCommercial umbrella insurance can offer you complete protection at the lowest cost if you have a small business with limited assets.

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How To Find the Right Type of Property Damage Liability Coverage?

Suppose the cost of purchasing property damage liability on your car insurance is too high. It is important to remember purchasing this type of auto insurance without buying an entire policy from a single provider. When shopping for coverages such as this one, 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. Only then choose the one gives you the best deal overall. 

When comparing property damage liability insurance, look at the costs of both your standard policy and any extras. Coverage for further property losses can help lower your overall premium. 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 property 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. 

In conclusion,

Understanding your insurance needs is a great way to figure out how much coverage you need. In doing so, you’ll be able to decide whether it’s worth spending extra money on optional coverages 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 property damage liability 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 tax-free only if the amount paid is for damage to property that doesn’t belong to you. For example, property damage settlements from a property-damage-only car accident are tax-free if the damages are property owned by someone else. Such as a fence or mailbox. 

However, property damage payments may not be tax-free if they’re only for property damaged that you own. For example, property damage coverages that pay for repairing damage to your car or property should be taxed because they’re property damages. 

What Types of Auto Liability Are There?

There are two types of auto liability coverages: property damage liability and bodily liability. 

As their names suggest, bodily liability coverage covers any bodily injuries caused by you to another individual in an accident. Whereas property damage liability coverage covers 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. 

How Mandatory is Property Damage Liability Insurance?

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; or, worse yet, you could face criminal charges for driving without it. If this is the case where you live, talk to 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 liability on your car insurance protect you from lawsuits for property damage in an accident; it also protects you from injuries that may result when in an accident. 

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