Property Damage Liability: Definition & How It Helps (2026)

What Does Property Damage Liability Cover (and Not Cover)?

Property damage liability insurance covers the cost of repairing or replacing property damaged in an accident that was your fault. This often involves paying for the cost to repair another driver’s car. It could also cover damage to property, such as a damaged fence or building exterior. In some policies, you’ll have coverage for legal fees related to the accident.

This type of insurance usually does not cover the cost of repairs for your own vehicle. You may need collision insurance or similar coverage to pick up the tab for your damages.

What’s the Difference Between Property Damage Liability and Collision Insurance?

Most of the largest insurance companies in the US offer a whole host of different kinds of car insurance. Before you purchase yours, it’s important to make sure you understand each type.

Many drivers mix up property damage liability and collision insurance. Property damage liability insurance pays to fix another driver’s car or other property when you’re responsible for the damage. On the other hand, collision insurance pays to fix your car regardless of who caused the damage.

Notably, property damage liability coverage is legally essential in most states. Collision insurance is usually optional, but lenders may require it if you’re financing a vehicle.

Property Damage Liability vs. Comprehensive Insurance: What’s the Difference?

Property damage liability insurance pays if you damage someone else’s property in a crash. Comprehensive insurance isn’t related to car accidents at all. This coverage pays for non-accident damage from causes like these:

• Hail
• Fallen trees
• Vandalism
• Animals

Like collision insurance, comprehensive insurance generally isn’t legally required, but many lenders ask for it if you’re financing a car.

How Does Property Damage Liability Work?

Knowing when your insurance kicks in, and how it works, can help you appreciate its importance. Here’s a look at how this type of insurance functions:

• You’re involved in a car accident. If you were at fault, then your insurance will step in to assess liability claims.
• The damaged property owner files a claim. This is often the other driver. They file a claim against your insurance policy. The insurance company assesses the damage and estimates repair costs.
• The claim is settled. If the insurance company approves the claim, then they pay on your behalf up to the policy limits. If damage exceeds your policy limit, you may be responsible for paying the difference out of pocket.

It’s important to carry adequate property damage liability insurance because the cost of property damage can add up quickly. This is especially true if the car you strike is expensive to repair or there are multiple vehicles involved in the accident.

What Else Is Property Damage Liability Required For?

Property damage liability insurance is not just for cars. Many states require this coverage for any type of vehicle. This means that if you ride a motorcycle or drive an RV, you will likely need property damage liability insurance as well.

How Much Property Damage Car Insurance Do I Need?

When deciding how much insurance to carry, it’s tempting to go with the cheapest option. But this can leave you with out of pocket expenses if the damage exceeds your policy limit. Let’s take a look at the factors you should consider when deciding how much coverage you need.

State Law Requirements

Most states require you to carry some level of property damage liability insurance. The minimum required amount varies by state. For example, California requires drivers to carry coverage for at least $5,000 per accident in property damage. Meanwhile, South Carolina requires drivers to carry no less than $25,000 per accident for property damage.

These requirements are in addition to minimum requirements for bodily injury damage insurance. Those minimums also vary by state.

It is important to remember that having the minimum required insurance does not necessarily mean you are adequately protected. If you cause an accident where the damage exceeds your policy limit, you can be held personally responsible for paying the difference. For this reason, you may want to purchase more coverage than the minimum requirement.

Personal Finances and Assets

Consider your financial situation when deciding how much property damage liability insurance to carry. If you have valuable assets, such as owning your home or other investments, these could be targeted in a lawsuit. Ideally, you should have coverage that is greater than your overall net worth.

Carrying higher coverage limits helps protect your assets because payout for damage is covered entirely by insurance. Otherwise, a car accident that is your fault could be financially devastating. Your home and other assets can be targeted to cover the damages that exceed your policy limits.

Risk Tolerance

Your personal approach to risk also plays a role in determining your coverage needs. If you’re a cautious driver with an accident-free history, then you might feel comfortable with lower coverage. If you live in an area where car accidents are common, then you might instead opt for higher coverage.

Keep in mind that car accidents can be unpredictable. There are over 15,000 car accidents per day in the U.S. It only takes one day’s bad luck to leave you on the hook for significant property damage costs.

You partially control your risk. Careful drivers are less likely to cause a crash. However, part of your risk is outside of your control. For example, you cannot predict the type of collision you might cause before it happens. This unknown factor can greatly affect the size of the possible claim against you.

Specifically, according to the Highway Loss Data Institute, the average damage estimate for a property damage liability claim depends on the location of the other vehicle’s damage, as follows:

• Rear End: $3,432
• Front End: $4,451
• Front End, Driver’s Side: $3,808
• Front End, Passenger’s Side: $3,941
• Front Fender, Driver’s Side: $3,514
• Front Fender, Passenger’s Side: $3,740
• Driver’s Side Door: $3,719
• Passenger’s Side Door: $4,023

Thus, a rear-end collision usually has the lowest costs, while a head-on car collision has the greatest average costs.

Additionally, bear in mind that these numbers provide averages across all vehicle types throughout the U.S. Repair costs for luxury models or in locations with high costs of living might be higher.

How to Find Your Property Damage Liability Limit

Not sure how much property damage liability insurance you have? When you look at the different liability limits on your policy, the last one listed is usually property damage liability.

Most policies write out policy limits in “bodily injury per person/bodily injury per accident/property damage liability per accident” format. So if your policy is 100,000/200,000/50,000, that means you have $50,000 in property damage liability coverage.

What Happens if Property Damage Exceeds Your Coverage Limit?

Your policy limit is the maximum your insurance will pay toward a given claim. But what happens if you cause more damage than your policy will cover?

Your insurer has a contractual duty to any liabilities that fall within your policy. Thus, if you have a $50,000 claim against you and you have $35,000 in property damage liability coverage, the insurer is obligated to pay up to $35,000 to the claimant under the insurance contract.

At the same time, the insurer has an interest in protecting itself from paying claims that do not fall under your policy. You have an interest in avoiding paying for any damage for which you are not legally liable. As a result, the insurance company may hire a lawyer to defend you.

This lawyer will attempt to settle the case for a payment at or below the policy limits. If the other party accepts a policy limit settlement, the next steps depend on the settlement terms.

A party that accepts the policy limits in full satisfaction of its claim will waive any further action against you. For example, suppose the other party had $31,000 in repair bills and accepted a settlement for the full policy limit of $30,000. They can waive the right to pursue you for the difference of $1,000.

Conversely, a party can accept a policy limit settlement and continue to pursue you for the unreimbursed losses. Thus, suppose you allegedly hit two vehicles, causing $15,000 in damage to one and $25,000 in damage to the other. Your insurer could distribute your $30,000 policy limit by paying one claimant in full and paying $15,000 toward the other claim.

In this case, you may be liable for the remaining amount of $10,000 to the second vehicle owner. The other driver may file a lawsuit against you. Since the insurer paid out the full policy limit, its duty to defend you has ended, and you must pay for your lawyer’s fees in this lawsuit. If you lose the case and don’t have enough assets to pay the judgment, they may be able to garnish your wages, put a lien on your home or take other actions to collect.

Have You Been Involved in a Car Accident?

If there is a dispute over who caused the accident, then it may be worthwhile to get a car accident lawyer to help you resolve things. ConsumerShield helps connect people with qualified local lawyers. Fill out our contact form to get help today.