What is Property Damage Liability?

Crash into someone's car? Learn how property damage liability insurance might cover those costs.

Kimberly Olson
March 29, 2022

If your vehicle damages someone else’s property—whether it’s their car, fence, or mailbox—you may be financially responsible for the repairs. When this happens, property damage liability insurance may cover those expenses—up to your policy limits.

What is property damage liability insurance?

If your car collides with someone else’s vehicle or property, your property damage liability policy funds the repairs, up to the policy’s limits—even if you live in a no-fault state.

Property damage liability insurance is required by law in most states, although some allow you to decline this coverage if you have enough assets to pay for possible damages. In order to forego property damage liability, however, you might be required to deposit significant funds that will be used to pay for any damages you might cause. Depending on the state you live in, you may need to deposit money with the state treasurer, for example, or obtain a surety bond.

How does property damage liability work?

This type of coverage works on a per-accident basis. Let’s say you’re driving and get distracted while changing the radio station. You hit a car, causing $5,500 in damage, then spin around and crash through someone’s fence, which now requires $500 to repair. If your damage liability coverage has a $5,000 limit, your policy will pay $5,000 toward damages and you’d pay the additional $1,000 out of your own pocket.

What does property damage liability cover?

Your property damage liability policy pays to repair or replace property that you damage, such as:

  • Vehicles, including replacement parts and auto body shop labor.
  • Buildings such as homes, offices, and stores.
  • Trees.
  • Fences, lampposts, mailboxes, telephone poles, and guardrails.
  • Lost income to a business if damage to that business caused it to close.

What doesn’t property damage liability cover?

Property damage liability does not cover expenses for:

  • Damage to your own vehicle.
  • Damage to your own personal property.
  • Medical bills.
  • Personal lost wages.
  • Attorney and court fees.

How much property damage liability do I need?

Each state sets its own minimum limits, which range from $5,000 to $25,000. The limit is the maximum dollar amount that your policy will pay for damages you cause, per accident.

Keep in mind that if you cause damage that exceeds your coverage limits, the person whose property you damaged will probably expect you to pay the difference yourself, and may even take you to court. Ask your insurance agent whether it makes sense to buy more coverage than your state requires, since raising your limit usually won’t increase your premium very much.

Talk to a AAA agent to learn more about property damage liability coverage and the benefits of a AAA Membership, including insurance discounts, legendary 24-hour roadside assistance, and even discounts on everyday purchases.

More Car Insurance Definitions

The availability, qualifications, and amounts of coverages, costs and discounts may vary from state to state and there may be coverages and discounts not listed here. In addition, other terms, conditions, and exclusions not described above may apply, and total savings may vary depending on the coverages purchased. For more information regarding your eligibility for certain coverages and savings opportunities, please contact your AAA agent. Insurance products in California offered by AAA Northern California Insurance Agency, License #0175868, in Nevada by AAA Nevada and in Utah by AAA Utah. Insurance provided by CSAA Insurance Group, a AAA insurer.