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Home > Car Insurance Coverage > Physical Damage Coverage > All About Physical Damage Coverage
All About Physical Damage Coverage
Physical damage coverage is the part of car insurance that covers damage to the property of the insured; it includes damage from perils such as collision, fire, vandalism, and theft. Physical damage coverage is divided into three basic categories: collision coverage, comprehensive coverage and specified perils coverage.
Collision coverage is an insurance intended to pay for the repair or replacement of the policy owner’s vehicle in the event of an accident, regardless of who caused the accident. Collision coverage protects your vehicle if it collides with an object, a structure, or another car. It also protects your car in case of an overturn. Your own insurer has to pay for damage caused in any of these cases even if the collision is your fault. Limitations are always based on the actual cash value of your vehicle and it is commonly written with a deductible of $100 or more.
Comprehensive coverage is intended to pay for the repair or replacement of the policy owner’s vehicle in the event of damage not resulting from an accident. Comprehensive coverage protects your vehicle against virtually all damage with the exception of loss caused by collisions. This specifically includes theft, fire, missiles, falling objects, glass breakage, earthquake, explosion, commotion, or colliding with a bird or other animal. As with collision damage, the coverage is based upon the actual cash value of the vehicle and is written with a deductible in many cases.
Finally, specified perils coverage is intended to pay for the repair or replacement of the policy owner’s vehicle in the event of an extensive list of perils. This type of coverage can be very expensive due to the fact that it covers so many perils. Businesses that are looking for this broad coverage can also opt for an alternative called “specified perils coverage”. This is sometimes called “fire, theft, and combined additional coverage” or “CAC”. It covers several of the perils that comprehensive coverage involves except windshield damage. However, this type of coverage does this on a named peril basis.
Coverage for your car in an auto insurance policy is not based on replacement cost. The total an insurance company will pay on a vehicle physical damage or theft claim depends on the “actual cash value” of the car. The actual cash value of the vehicle is calculated by subtracting the depreciation to the replacement cost. Most of the time, depreciation equals the current market value at the time of loss. Consequently, the obligation of the company is to repair the vehicle based upon its actual cash value, and not its replacement cost. The insurance company might pay the business owner the value of the loss in money or, at its preference, it may repair or replace the damaged or stolen vehicle or return a stolen vehicle to the business owner with payment for any damage caused by the theft.
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