Liability insurance encompasses two areas: bodily damage and property damage to another party, caused by your vehicle.
Property damage liability insurance covers you in the event that your car damages someone else’s property. For instance, if your teen driver accidentally backs into your neighbor’s parked car, your property damage liability insurance will pay for the repairs. If you run over someone’s purebred dog and are found at fault, your property damage liability insurance can cover the dog, too.
Property damage liability is a requirement in most states. Even if it’s not required, auto lenders may require you to have this insurance. Without property damage liability insurance, you will be forced to pay out of pocket for the damages caused by your vehicle, and may even get sued for your assets.
What Property Damage Coverage Covers
Property damage liability insurance takes effect when your vehicle is involved in an accident and found at least partially at fault for causing damage to another person’s property. It will not cover your own property.
Exactly what your liability insurance covers varies according to your policy and amount of coverage, so read the contract carefully or ask your insurance agent. You may also have a deductible, or amount that you are responsible for paying out of pocket. Basically, property liability insurance covers:
Repair of property you were found at fault for damaging, including parts.
Replacement of property you were found at fault for damaging, including personal items that were damaged secondarily (for instance, items left inside a car that was totaled).
Combined Single Limit or Split Limit Coverage
You can choose to have either Combined Single Limit (CSL) coverage or split limit coverage. CSL is a single amount of coverage that can be applied to either bodily damage or property damage, or both. For example, let’s say you have a CSL with $500,000 to cover both bodily and property damages. If you knock down your neighbor’s brand-new $10,000 fence, then you will be covered under the CSL.
Split limit coverage allows you to split the limits between bodily and property damages. You may decide you need $100,000 worth of bodily damage and $5,000 worth of property damage coverage. If you hit that $10,000 fence, you will have to pay the extra $5,000 out of pocket; you can’t take the extra coverage out of your bodily damage portion.
Whichever way you go, be sure you have adequate coverage.
Who Needs Property Damage Coverage
Everyone should have property damage liability insurance, especially if you own a home or have other assets that you can be forced to liquidate in the event of an accident. Having this insurance protects your other assets.
However, not every state requires this insurance. Some states offer an expensive alternative, allowing you to deposit a bond worth tens of thousands of dollars with the state government. For instance, in Ohio you have to post a $30,000 bond with the State Treasurer. Other states, like California, require you to leave a similar amount in cash with their motor vehicle department.
Where to Get Property Damage Coverage
Obtain this coverage when you buy your auto insurance. All auto insurance companies offer property damage liability, along with bodily damage coverage.
How Much Property Damage Coverage Costs
Everyone pays a different amount for property damage liability insurance. Insurance rates are affected by:
- The year, make and model of your vehicle; newer cars cost more.
- Your driving record (tickets increase the rate) and age.
- How many miles you drive annually.
- The amount of coverage required by your state’s laws.
- The amount of coverage you request.
- How long you have been with the insurance company; most offer loyalty discounts after a few years.
For example, a driver with a car a few years old who has a clean driving record could pay $110 per year for $25,000 worth of property damage liability coverage, in addition to other insurance costs. To find out what your rate will be, obtain your own quote from several companies.
