Your thinking of 'penalty heavy', the damage setting will not have an effect on any light contact such as minor punting or bump drafting.
Honestly, damage at heavy is more realistic, but it's just not very fun. At heavy if you loose the tail end and smack a gaurd rail, you'll be forced to pit and go down a lap, possibly racing by yourself for the remainder. At damage light, though your car unrealistically repairs itself, smacking the rail will only cost you a few positions and your left with a chance to continue fighting for position.