What Is Physical Damage Coverage?
Physical damage coverage is a general term for a group of insurance coverages that includes Comprehensive and Collision. Physical damage is inclusive of these two types of coverages with most insurance carriers and may include other miscellaneous optional coverages depending on the insurance carrier.
Comprehensive and Collision Coverage
Comprehensive coverage:
It is defined as loss from any cause except the covered vehicle’s collision with another object, or overturn or upset.Collision coverage:
It is defined as loss from collision with another object, or another vehicle, or overturn or upset.
With all forms of insurance, whenever there are exclusions in any policy, it is because that exact coverage is available under another form of coverage, or available in another type of policy, or cannot be purchased anywhere. An example of this would be nuclear, war, racing, wear and tear, mechanical or electrical breakdown, road damage to tires, and certain property items unless specifically itemized.
This is why comprehensive and collision coverage are bundled together as “physical damage”, as the combination closes gaps in coverage when the two are combined in one policy. They can be purchased separately, although this is rare, hard to find, and not recommended for the minimal cost savings.
What Does It Cover?
Comprehensive and Collision, in its basic form, are the same with most insurance carriers. There are also enhancements to the basic coverage to meet the individual needs of the trucker. An example is “Trailer Interchange” coverage which extends coverage to non-owned trailers that are being pulled by you and that require Physical Damage coverage per your lease contract with the shipper. Normally this coverage is in addition and is written for a specific amount, and will respond to damage to any non-owned trailer and does not require that the specific trailer be added to your policy.
Comprehensive and Collision covers anything that happens to the vehicle with the possible exception of: refrigeration breakdown, side kits, wet-line kits, tarps, chains, and binders depending on the insurance carrier and policy wording. Many of these items, if excluded in your policy can be added for a relatively small amount of premium.
Normally, “equipment” does not include CB’s, TV’s, cell phones, computers, electronic equipment, GPS, except in some cases with some carriers, it can be “bought back” using a special endorsement to the policy.
Changes in Equipment
The Physical Damage portion of the policy normally covers “specifically described” equipment since this coverage is written on a “Scheduled Auto” form.
It is important that you notify your agent if you change your equipment schedule in any way so that the replacement equipment is properly listed and insured, and the sold unit is removed from your policy. With most policy forms, you have up to 30 days to notify the agent of any changes.
How are claims settled?
Comprehensive and Collision coverage is settled at Actual Cash Value or Cost of Repair, whichever is less, minus any deductible, also limited to the “Stated Amount” listed on your policy. A $1,000 deductible is most common.
Actual Cash Value is defined as the true worth of the equipment at the time of loss, based on similar equipment that has been sold on the open market, with the same model year and mileage that was on the vehicle in the case of a power unit. Often times an insured will suggest an amount of coverage that is in excess of the Actual Cash Value on the open market. The hope is that the insured will recover from a total loss with a value that is closer to “replacement cost”, but unfortunately in those cases, the insured is paying for an amount of coverage that will never be realized. “Replacement Cost” or “Agreed Amount” policies are no longer available in the market, so you should try to determine what the unit could be sold for today, considering the condition and the mileage and assign that amount of coverage to the unit.
Understanding “Stated Amount” Coverage
Stated Amount is now the most common form and is a limitation of coverage vs. a guaranteed amount of recovery in the event of a total loss. If the Actual Cash Value turns out to be less than the Stated Amount on your policy, you will only recover the Actual Cash Value. Most, if not all, policies today are offered on a Stated Amount basis.
Conversely, if you under insure by not assigning an adequate amount of coverage as the Stated Amount, you may find yourself in a position with not enough coverage if there is a total loss. This seems to be an area of confusion for many people and it is the insurance industry’s responsibility to properly explain and educate the consumer as to how Stated Amount works.
Conclusion
Physical damage coverage in trucking is important because it caters to the most basic insurance requirements for all of your equipment in the case of physical damage loss of any kind, including a weather-related loss or theft.
We specialize in truck insurance and can help you with a well-designed package for your operation. For more information, or just a discussion, please visit our website or contact us directly.
You can also get a free quote here for all your physical damage coverage and insurance needs.