Which type of insurance covers damages to the other party's car and possessions when an accident is the policyholder's fault?

The correct answer is property damage liability insurance because it specifically protects the policyholder from financial responsibility for damages caused to another person's property, which includes their car and possessions, in the event of an accident where the policyholder is at fault. This type of insurance is a critical part of auto insurance policies and is required by law in many jurisdictions.

Property damage liability insurance ensures that the costs for repairs or replacement of the other party's property are covered, allowing the policyholder to avoid out-of-pocket expenses for damages they caused. This coverage is essential for any driver, as it provides a financial safety net in case of accidents.

The other types of insurance do not cover this scenario in the same way. Collision insurance focuses on damages to the policyholder's own vehicle, regardless of fault. Comprehensive insurance covers non-collision-related incidents like theft or natural disasters. Bodily injury liability insurance pertains to medical expenses and other damages resulting from injuries to the other party, rather than property damage. Thus, property damage liability is the dedicated coverage for damages to the other party's property when the policyholder is at fault.