A few years ago, Menard Solve was sandwiched in a three-car accident. He was driving when the SUV in front of him stopped abruptly. Forced to brake, he was also rear-ended by the car behind him.
While he was sued by the SUV driver for half a million dollars for injuries and minor car damage, the other driver got $70,000 in both property damage and bodily injury. Solve’s Prius C sustained $13,000 in damage.
The silver lining? Solve didn’t skimp on car insurance. He had $250,000 maximum coverage for bodily injury per person, $500,000 for bodily injury per accident, and $250,000 for property damage per incident.
His car insurance covered property damage and bodily injury. He only paid $1,000 for the deductible. And he received $500 from the driver who rear-ended him. In the end, he paid $500 of his own money for everything.
Here’s what you need to know about property damage liability coverage:
What is property damage liability?
It covers damage you cause to another car, their valuables, or property. In some states, it could also cover damage that someone else who is driving your car — with your permission — causes.
Almost every state in the U.S. makes it mandatory to have property damage coverage. The only two states that don’t require car insurance are New Hampshire and Virginia.
(Note: In New Hampshire you need to be able to cover losses from an at-fault accident where you’re at fault. And in Virginia, if you opt out of car insurance, you need to pay an annual uninsured motor vehicle fee of $500.)
What does it cover?
Besides damage to other drivers’ cars or property, it also covers their personal items in the car during the accident. For example, maybe they were on their way to a wedding. If the accident damaged the wedding gift, they could file a claim to receive payout for the gift.
Bodily injury liability covers per incident and per person. But for property damage liability, it’s per accident.
If you cause an accident, property damage liability doesn’t cover your car or property. It only covers the other drivers’. You need collision insurance to have your own car covered.
How does it work?
If you’re at fault, you would file a claim with your insurance company to receive the payout.
For Solve, the initial filing of the claim went smoothly. Besides asking whether Solve had additional liability insurance, such as an umbrella policy, they asked him to show any photos he took of the crash scene.
When does it comes in handy?
As Solve’s story shows, if you caused the accident, property damage will cover damage to another driver’s car. It will also cover damage to property. This includes private and government property, such as a tree on the sidewalk, or a utility pole.
Not only does it cover this sort of damage in the case that you’re in the driver’s seat, but it will pay for damage if another driver is using your car. With your permission, of course.
If you get sued, like Solve, liability insurance kicks in. It protects your assets. If the payout is higher than the coverage amounts, you would be financially responsible for what exceeds the payout.
What are the requirements for coverage?
The minimum coverage amounts for varies per state. State minimum coverage might not be enough to take care of the costs of a serious fender-bender.
In California, minimum coverage for property damage liability is $5,000 per incident. In New York, it’s $10,000 per accident. And if you live in Alabama, it’s $25,000 per accident.
How much coverage do I need?
This depends on your needs and what you can afford.
Besides meeting the state minimum coverage, you should get enough coverage to pay for damages in case of a fender bender. You should also have coverage to cover everyone in your household.
If you can’t pay out-of-pocket for an accident, you should consider getting higher coverage amounts.
What does it cost?
It depends on: the type and extent of coverage, your age and gender, your driving record, location, and how often you use your car.
The higher the coverage amount, the higher your insurance premium.
The rates among insurers vary. When shopping around for car insurance, make sure you get quotes for the same level of coverage.
If you add several cars to your homeowners policy, have a clean driving record, or are eligible for a discount, your premium could be lower.
For Solve, having higher coverage helped with the blow of the multi-car accident.
Solve’s premium for six months was $600 for three cars in his household.
“Getting involved in an accident is a time-consuming process that should be avoided as much as possible,” says Menard. “I’m grateful nobody got hurt and that my premiums remained the same in spite of the accident.”