Glossary
Physical damage coverage, defined
The part of an auto or commercial vehicle policy that pays to repair or replace the insured vehicle itself, as opposed to the liability sections that pay for harm to others.
In practice
It has two halves. Collision pays when the vehicle hits or is hit by another vehicle or object, or rolls over. Comprehensive, sometimes called other than collision, pays for theft, fire, glass, hail, flood, vandalism and animal strikes. Each carries its own deductible. On commercial fleets it is bought per vehicle or on a schedule, and a lender or lessor requires it until the loan is paid. Valuation is actual cash value unless the policy is written on an agreed or stated amount basis. Owner-operators sometimes buy it through the motor carrier's program, which is convenient but ends when the lease does. When an older vehicle is worth little more than the premium plus the deductible, dropping it is the right call.
A worked example
Suppose a delivery van worth $28,000 is stolen from a lot and never recovered. The comprehensive half of the policy pays $28,000 less a $1,000 deductible, to the lender first and any balance to the business. Hypothetical figures.
Applies to: Commercial Auto Insurance