How Much Property Damage Car Insurance Do I Need?
"How much property damage car insurance do I need?" is a common question for new drivers as well as those who move to a new state or purchase their own auto coverage after relying on a parent's policy. If you cause an accident, property damage liability coverage pays for repair or replacement of the other vehicles involved as well as other related property damage. Most states require drivers to carry property damage liability along with bodily injury liability, which pays for the medical expenses of others involved in an at-fault accident.
Provisions of Property Damage Coverage
According to the auto insurance website The Zebra, most property damage liability policies cover these expenses for the other parties involved if you cause an accident:
The cost of losses incurred by a business that had to close because of damage
Legal fees for a lawsuit filed against you for property damage
Damage to fences, housing and other stationary objects
Damage to other vehicles
Any other recurring costs resulting from accident damage
You cannot use your property damage liability policy to cover damage to your own property or vehicle. Depending on the incident, you would need either a comprehensive or collision policy to cover those costs.
If you have an accident and the officers at the scene and/or the insurance company decides that you have primary fault for the accident, the other driver will make a claim against your liability policy for the cost of repair or replacement for their car. This is called a third-party claim. Remember that the insurance company will only pay up to your policy limits in this situation, so you could end up on the hook for the cost of excessive damages if your policy limits don't fully cover the cost of their repairs.
Deciding on Property Damage Coverage
If you cause an auto accident, your costs could far exceed the minimum liability costs in your state. If that occurs, the injured parties can sue you for the remaining amount, risking a hit to your personal net worth. You may have to sell your car, your valuables, or even your home if you end up in this situation, which can be financially devastating.
For this reason, many people purchase additional car insurance liability coverage. To determine the maximum amount you should purchase, Kiplinger suggests adding all your assets and property then subtracting your debt, which is the value of your net worth. If you have a very high net worth, consider buying an umbrella policy if you max out on available auto insurance liability coverage. This type of policy adds more coverage for your vehicles as well as your home. You can also add coverage for incidents such as premises injury, animal attack, and libel, in case you get sued for any reason.
On the other hand, if you own few assets, you might not need more liability coverage since you have little to lose in a lawsuit. By the same token, if you rarely have guests over, you have a low level of risk for premises liability, so you probably don't need to supplement your home and auto coverage with an umbrella policy.
WalletHub notes that for most policies you can either designate a set amount for property damage and bodily injury or buy a split limit policy. With the latter, you can divide the coverage between coverage types as needed if an accident occurs.
The higher coverage limits you choose, the higher premium amounts you will pay. However, most people only pay a small amount more based on this variable, as reported by ValuePenguin using the sample of a New York driver with a 2014 Toyota Camry:
$10,000 coverage limit - $136 per year
$15,000 coverage limit - $138 per year
$20,000 coverage limit - $139 per year
$25,000 coverage limit - $140 per year
$50,000 coverage limit - $143 per year
$100,000 coverage - $146 per year
When you select auto insurance coverage, you will usually see a notation like this on your policy: $50,000/$100,000/$50,000, also written as 50/100/50. This example means that you have $50,000 in bodily injury liability insurance per person, $100,000 per accident for bodily injury, and $50,000 per accident in property damage liability under your policy.
Minimum Property Damage by State
States mandate auto insurance liability coverage to allow drivers to get back on the road quickly after an accident. According to NerdWallet, states require the following minimum property damage liability coverages:
$5000 - California, Massachusetts, New Jersey, Pennsylvania
$10,000 - Arizona, Delaware, Florida, Hawaii, Michigan, Minnesota, New Mexico, New York, Vermont, Washington, Washington DC, Wisconsin
$15,000 - Colorado, Idaho, Iowa, Maryland, Tennessee, Utah
$20,000 - Illinois, Montana, Nevada, Oregon, Virginia, Wyoming
$25,000 - Alabama, Alaska, Arkansas, Connecticut, Georgia, Indiana, Kansas, Kentucky, Louisiana, Maine, Mississippi, Missouri, Nebraska, New Hampshire, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Texas, West Virginia
In most states, you are required to purchase additional coverage beyond property damage liability, but New Hampshire does not require drivers to have any liability insurance. Additionally, you can pay $500 to waive liability insurance in Virginia.
In some states, you can also prove that you have the money to cover the costs of an at-fault accident instead of buying an insurance policy, but you might need to post a bond or deposit funds in an escrow account if you choose this option. However, most drivers simply choose to go the insurance route rather than put up significant cash.
Now that you've answered the question of how much property damage insurance you need, it's time to shop around and find the best rates for auto liability coverage in your area. You will pay less for auto insurance if you live in a rural area, have a clean driving record, have good credit, and have many years of driving experience under your belt. By understanding these factors, you'll have the information you need to purchase sufficient property damage insurance at an affordable rate.
Sources:
https://www.nerdwallet.com/article/insurance/auto/liability-car-insurance
https://www.thezebra.com/auto-insurance/insurance-guide/property-damage-liability/
https://wallethub.com/edu/ci/property-damage-liability/8775
https://www.valuepenguin.com/property-damage-liability-car-insurance
https://www.caranddriver.com/shopping-advice/a35536605/2021-editors-choice/
https://www.caranddriver.com/shopping-advice/a35536605/2021-editors-choice/
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