WHAT IS PHYSICAL DAMAGE INSURANCE?

Operators of commercial vehicles, such as truckers, need a number of insurance products.

Automobile Physical Damage insurance covers the damage to, disappearance, or destruction of actual automobiles and/or their equipment, such as tractors, trailers or semitrailers, trucks, or private passenger types of vehicles.  Equipment does not include personal effects (clothes, eyeglasses, etc.)

Covered autos are determined by designation symbols that must be tailored to whether the automobile that is to be insured is owned, rented, leased, hired, or borrowed and the type of vehicle.  Premiums usually depend upon the type and age of the vehicle, coverages chosen, garaging location, driver information, deductibles chosen, and loss experience

Such coverage is divided into two major components “collision” and “all perils other than collision.”   Collision covers striking another object (including other vehicles) and overturn of the vehicle.

“All perils other than collision” include loss by fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, vandalism, falling objects, or the sinking, burning, collision or derailment of any conveyance transporting the auto.  These coverages can be purchased on an all inclusive or comprehensive basis, or a basis where each peril is specifically described (called named peril or limited specified causes of loss.)  In both cases there are some perils which are excluded from coverage.

Excluded perils for which no physical damage insurance coverage is ordinarily provided include nuclear hazards, war or military actions, organized racing or demolition contests, wear and tear, road damage to tires, and damage to most electronic equipment not required for the operation of the vehicle.

Although not mandated by law, like automobile liability insurance, physical damage is ordinarily required by financial institutions that loan money to purchase automobiles.  Since the automobile is used as collateral for the loan, the lender needs to make sure that the collateral remains unimpaired.  The insured’s own equity in his or her vehicle is also protected.

There are ordinarily separate deductibles for the “collision” and “other than collision” coverages.  Deductibles are the portion the insured must pay in the event of a loss.

The amount of coverage is ordinarily limited to the cost of repairing or replacing the damaged or stolen property or its value less depreciation.  If an insurer pays a physical damage claim that is the fault of someone else then the insurance company upon paying the physical damage claim assumes the right to recover the cost from whoever caused the claim.