PROPERTY DAMAGE LIABILITY COVERAGE

Property Damage Liability Coverage

Property Damage Liability Coverage.

Property damage liability coverage you might have heard of it but what is it the picture of this.

You’re driving to the store on the way you accidentally rear-end a stopped car at an intersection nobody is injured.

                                                                      

But the other car is damaged that’s what property damage liability coverage is for your coverage provides for a couple of key things one damage to the other person’s car.

If you’re liable for the accident up to your policy limit and to your legal defense if the owner of the opposite vehicle Sue’s you here’s another important thing to keep in mind if you’re found liable for an accident your net worth could be at risk.

The more assets you’ve got the more coverage you’ll want for extra liability protection.

Property damage liability in the context of a car insurance policy.

Property damage liability is going to cover things like damage you do to other people’s vehicles damage you might do by running into a building or even something like a stop sign now notice.

So if you do damage to your own car if you wreck your car property damage liability is not going to cover that something like collision insurance might cover that damage that you do.

But property damage liability definitely will not it’s covering damage you do to other cars to buildings and so forth.

So property damage liability is typically mandatory at least in the United States every state will have mandatory minimum coverage.

Now the amount of coverage that you have for your property damage liability whether it’s ten thousand dollars worth of liability coverage or it’s fifty thousand.

That will vary based on the state in terms of what is legally required to have now you can always go and purchase more than the mandatory minimum but that’s a decision you’ll have to make.

Let’s talk about an example so let’s say that you have the legal minimum coverage in your state and let’s say that your state it would be twenty-five thousand dollars of property damage liability and this if you haven’t seen this before this is actually what’s called a split limit.

This is a split limit in the first two numbers here the 50 and 100 are actually related to bodily injury coverage.

The split limit that’s the quote for the amount of property damage liability per accident that you would be covered for under your policy.

So let’s say you have this policy and so you’re covered for up to $25,000 and damages so let’s say now that you go out and you accidentally you wreck a Corvette so there’s a Chevy Corvette beautiful Corvette you accidentally run into it.

You caused some damages it ends up being forty-seven thousand dollars worth of damages and now you say hey look well I’ve got this insurance I’ve got this policy and I want to use this policy to help myself pay to get you to know good coverage for this forty-seven thousand dollars.

So here’s how it would work, the first twenty-five thousand dollars that you’ve done in damages is going to be covered by your policy.

So you’ve got 25k we’ll go this will be your policy will cover those damages but now you’ve got.

Let’s notice here we’ve got forty-seven thousand dollars in damages, what we’re gonna do is we’re going to take the 47 thousand and we’re gonna subtract out the 25 thousand that’s paid by your policy.

That’s going to give us twenty-two thousand dollars now you might be wondering why are you doing this what are these calculations mean.

Well this is what’s called your out-of-pocket costs right so out-of-pocket the meaning here is that look you did forty-seven thousand dollars in damages to someone else’s vehicle, however, your insurance only covered 25 thousand.

So that person whom you did the damage to their vehicle they still have a claim against you for twenty-two thousand dollars.

They can come after you for these out-of-pocket costs and that means that if you have twenty-two thousand dollars sitting in the bank or you have twenty-two thousand dollars in assets or so forth if they wanted to they could come and sue you and try and get see some of your assets and pay these out-of-pocket costs.

You basically you could be on the hook for that twenty-two thousand dollars in damages.

For this reason, people who have a lot of assets or who want to protect themselves will say look even though this is the legal minimum coverage in my state.

I actually want more than twenty-five thousand dollars in property damage liability maybe I want a hundred thousand in property damage liability or five hundred thousand.

Basically, the more assets you have, you have a house, cars, and money in the bank and so forth.

The more assets you have the more exposure you have to some kind of accident and if you think about it.

It’s at all possible if you can afford it might be worth it to say oh hey I’m gonna pay an extra hundred dollars every six months and car insurance premiums.

So I can have a higher policy let’s say you have five hundred thousand in coverage or so forth it might be an extra hundred dollars every six months.

That you’re paying but what you’re getting is you’re saving if there ever was an accident and you might cause.

Let’s say three hundred thousand dollars in damage to a building or something now you will have the peace of mind you’ll be covered instead of saying oh now I have all these out-of-pocket costs that I can’t possibly pay and I’m gonna have my car or my home or assets that I have stock or something on my life savings.

GAP COVERAGE INSURANCE