You are driving down the street. Suddenly, the wind blows a trashcan right in front of your car. You swerve just in time, but you hit a parked car. What happens next? Your automobile insurance policy includes property damage coverage for damages you made to someone else’s property.
Q: What does property damage coverage involve?
A: Property damage can involve incidents with another car, or someone’s house, tree, fence or other possessions.
If you have an auto accident, a lawsuit may be filed against you. Property damage coverage can provide you with legal protection.
Q: Does property damage coverage involve the damage that I cause to my vehicle?
A: No. You need additional collision and comprehensive coverage for the damages to your vehicle.
Q: Is property damage coverage required?
A: Yes. In most states, property damage insurance is required as part of the minimum automobile coverage that you must carry as a car owner.
Q: How much property damage coverage should I have?
A: You need to consider two factors when determining the amount of auto insurance limits of liability to carry. First, what is your current net worth? Second, what is your future earning potential? Court awards are like taxes, in that they are with you for life, surviving even a bankruptcy.
The insurance industry recommends property damage liability coverage of $50,000 or more, although state requirements vary. The risk of property damage is usually far less than personal injury and this is reflected in the cost of the coverage.
If you chose a limit of $50,000, your property damage coverage would pay up to that amount for all of the property damaged in an accident that you caused.
If your mishap results in a multi-car accident in which some of the cars involved are valued over $50,000 each, you could easily exceed that minimal limit. If you hit a building with your car and a fire ensues, again, a small limit could be a problem. Especially if the fire is a total loss and the building value is far more than your minimal limits.
Q: What is the difference between combined single limit and split limit?
A: Your property damage limit can also be represented as a combined single limit (CSL). A CSL consists of the limits for both your Bodily Injury insurance and your Property Damage coverage.
For example, if you have selected a CSL of $500,000, your insurance company would pay up to $500,000 for all medical and injury-related bills and property damage that you caused in an accident. If you had a CSL, all of the damage would be covered up to the amount of the single limit.
If, instead, you have selected a split limit for liability insurance, the property damage coverage would pay to repair or replace the other person’s damaged car and property up to your maximum chosen limit of $50,000. If the total damage amounted to $60,000, you would be responsible for the outstanding $10,000. Medical expenses would be paid separately through your Bodily Injury coverage.
Q: What if I do not have property damage coverage?
A: If you do not have property damage liability as a component of your automobile insurance and your state requires it, you could face fines, suspension of your license or loss of your vehicle’s registration.
Also, without property damage liability coverage, you will be held personally responsible for any property damage you cause to others in an auto accident. All payments would come out of your pocket.
Even if you do carry property damage coverage, but set a low limit to save money on your premium, you could be putting yourself at financial risk. If you cause a serious accident in which the damages exceed your limit, you can be held personally responsible for the coverage.
Use your local, independent insurance agent’s expertise to help explain your options.
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Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.
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