Navigating the Aftermath: What to Do When Property Damage Exceeds Insurance Coverage

When you’re involved in a car accident, the last thing you want to worry about is whether your insurance coverage will be enough to cover the costs. Unfortunately, in some cases, the property damage resulting from the accident can exceed your insurance limits, leaving you financially vulnerable. In this comprehensive guide, we’ll explore what happens when property damage exceeds insurance coverage, and provide you with practical strategies to protect yourself and your assets.

Understanding Property Damage Claims

Property damage claims arise when an accident results in damage to vehicles, buildings, or other structures. In such cases, the at-fault party’s liability insurance coverage is responsible for paying for the repairs or replacement costs, up to the policy limits. However, if the damage exceeds those limits, the at-fault party may be held personally liable for the remaining expenses.

What Happens When Property Damage Exceeds Insurance Coverage?

If you’re found to be at fault for an accident and the property damage exceeds your insurance coverage limits, you could face significant financial consequences. Here are some potential scenarios:

  1. Liability Lawsuit: The other party involved in the accident may decide to file a liability lawsuit against you to recover the remaining costs not covered by your insurance. If the court rules in their favor, you may be required to pay the outstanding amount out of your own pocket.

  2. Wage Garnishment: If you are unable to pay the judgment awarded to the other party, the court may order wage garnishment. This means that a portion of your paycheck will be automatically deducted and sent to the other party until the debt is paid off.

  3. Lien on Personal Assets: In some cases, the court may place a lien on your personal assets, such as your home, cars, or bank accounts. This allows the other party to claim ownership of those assets if you fail to pay the judgment.

  4. Bankruptcy: In extreme cases, if the outstanding debt is too high and you lack the financial resources to pay it, you may need to consider filing for bankruptcy. However, this should be a last resort as it can have long-lasting negative impacts on your credit score and overall financial well-being.

Protecting Yourself: Strategies to Consider

While property damage exceeding insurance coverage can be a daunting situation, there are steps you can take to protect yourself and minimize the potential consequences.

1. Increase Your Liability Coverage Limits

One of the most effective ways to reduce the risk of property damage exceeding your insurance coverage is to increase your liability coverage limits. Many insurance experts recommend carrying liability limits of at least $100,000 per person and $300,000 per accident for bodily injury, as well as $100,000 for property damage.

By increasing your liability coverage limits, you’ll have a higher level of protection in case of a severe accident, reducing the likelihood of being held personally responsible for any remaining costs.

2. Consider Umbrella Insurance

Umbrella insurance is an additional layer of liability coverage that can provide extra protection beyond the limits of your standard auto or homeowner’s insurance policies. It can cover a wide range of claims, including those related to property damage, bodily injury, and even personal liability claims.

With umbrella insurance, you can typically increase your liability coverage by $1 million or more, providing a valuable safety net in case of a catastrophic accident or lawsuit.

3. Maintain Sufficient Emergency Funds

Having an emergency fund set aside can be a lifesaver in the event that property damage exceeds your insurance coverage. Ideally, you should aim to have enough savings to cover at least six to twelve months’ worth of living expenses.

If you find yourself facing a significant out-of-pocket expense due to an accident, your emergency fund can help cover the costs and prevent you from going into debt or depleting your retirement savings.

4. Consult with a Personal Injury Attorney

If you’re involved in an accident where the property damage exceeds your insurance coverage, it’s advisable to consult with a personal injury attorney. An experienced attorney can help you navigate the legal process, negotiate with insurance companies, and represent you in court if necessary.

They can also advise you on your rights and obligations, as well as explore potential strategies for protecting your assets and minimizing your financial liability.


While property damage exceeding insurance coverage can be a challenging and stressful situation, it’s important to remain proactive and take steps to protect yourself. By increasing your liability coverage limits, considering umbrella insurance, maintaining an emergency fund, and seeking legal counsel when necessary, you can mitigate the potential financial impact and safeguard your assets.

Remember, being adequately insured and prepared for the unexpected is crucial in today’s litigious society. By taking the right precautions, you can have peace of mind knowing that you’re protected in the event of an accident where property damage exceeds your insurance coverage.

What happens if the damages in an auto accident lawsuit exceeds the amount of liability insurance?


Who pays the damages that exceed the policy limits?

If, ultimately, “the judgment exceeds the policy limits,” the insurance company is liable “for the entire judgment,” including the amount in excess of policy limits.

What is property damage coverage in insurance?

What is Property Damage Coverage? If you’re responsible for an accident, Property Damage Coverage will take care of the cost of repairing or replacing another person’s property. This typically means damage to someone else’s car, but it could apply to any other type of property you damage in an accident.

Which insurance product covers damages that exceed liability coverage limits?

Sometimes, a driver may carry a secondary insurance policy called “umbrella insurance.” This type of policy helps provide coverage for damages that exceed a regular insurance policy’s limit. Just like a regular insurance policy, it can cover expenses like bodily injuries and property damage.

What is a claim in excess of policy limits?

Losses in excess of policy limits is an expression used in reinsurance agreements that refers to damages awarded by a court against an insurer in favor of the insured, due to the insurer’s having failed to settle a third-party claim against the insured within the policy limits by reason of bad faith, fraud, or gross …

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