Does Liability Insurance Cover Property Theft?

We want our insurance to be there when we need it. So if we're in an accident, we expect our auto insurance to protect us in terms of auto repair, healthcare bills, property damage, even pain and suffering. Better yet, we might live in a state that makes sure the at-fault party pays these expenses, so we're even more protected by their insurance company.

But it's important to understand the limitations and purposes of different kinds of insurance, and property damage liability insurance is often misunderstood. Take, for example, this scenario:

You have a laptop computer, and you travel with it everywhere. You went for a cup of coffee and left the laptop in your back seat. You return to the car a half-hour later, and discover your car's been broken into, and your laptop is gone. Good thing you have property damage liability insurance, right?

Yeah, not so fast.

This scenario isn't covered by your property damage liability clause in your policy. In actuality, you need to rely on your homeowner's or renter's insurance policy, which should have provisions to protect your belongings. This is not an auto insurance issue; it's a homeowner's or renter's insurance issue.

So, what does liability insurance actually cover, then?

Liability insurance does have a purpose — just not one that covers your stolen laptop. If you have property damage liability, it covers you (your expenses) in the event that you're at risk for damaging someone else's property.

Notice, this is very much different from something being stolen from your car.

A good example of property damage liability is if you are in an accident on a residential street, and run through a neighbor's mailbox and front yard. You damaged their property. You are liable. And your property damage liability insurance would cover the expenses necessary to repair/fix any damage you caused.

Most states outline specific obligations for how much property damage liability and personal injury protection you must purchase in your car insurance policy. Make sure these amounts are appropriately high — you want your insurance to protect you fully, and not simply cover incidentals.

Tips for success

So this scenario might seem confusing, right? How do you know which policy to file a claim on? Well, it can be much easier if you opt to get your homeowner's and auto insurance policies through the same insurance company. That way, your policies are linked, and you'll be able to get sound, fast answers when you need help the most. Better yet, many insurance companies offer multi-policy auto insurance discounts to those consumers who purchase different types of coverage.