What Is Physical Damage Coverage for Car Insurance?

Physical damage coverage refers to the insurance covers you buy to protect your vehicle from potential harm. When you purchase Collision and Comprehensive coverage together, you effectively safeguard your own car against a wide range of risks, including traffic accidents, fire, theft, vandalism, flood, storms, hail, and various other weather-related and accidental incidents. Consequently, these coverages supply you with the necessary protection against physical damage, and you’ll find them itemized on your policy declaration page instead of an item labeled “physical damage.”

A liability-only auto insurance policy is designed to cover damages and injuries that you might cause to others in an accident for which you are at fault, without providing any protection for your own vehicle. You have the option to include Collision and Comprehensive coverage alongside the required Liability coverage and other state-mandated provisions to protect your own vehicle. While almost every state mandates a minimum level of liability coverage, Comprehensive and Collision coverage is optional.

However, it’s important to note that lenders and leasing companies typically insist on these additional coverages as part of their requirements.  Any harm the car incurs in an accident is covered by Collision coverage, while non-collision-related losses such as theft, fire, vandalism, and weather-related damages are covered by Comprehensive coverage. When combined, these coverages provide a comprehensive level of physical damage protection that meets the requirements of lenders and lessors, ensuring the safeguarding of their investment.

Most people who own expensive enough vehicles would want to protect their investments in case something happens to it. By incorporating Collision and Comprehensive coverage into your car insurance policy, you ensure that your vehicle is protected and can be repaired or replaced in various scenarios, including accidents, collisions with animals like deer, fire damage, hurricane-related damage, and numerous other unforeseen incidents.

Both Collision and Comprehensive vehicle insurance covers typically have deductibles, which necessitate that you make a predetermined financial contribution to each claim. These deductibles commonly fall within the range of $250 to $500, and you have the flexibility to raise your deductible amounts as a means to reduce your insurance premiums. Typically, as the out-of-pocket expense (deductible) increases, your premium costs tend to decrease, offering you potential savings on your insurance premium.

As your vehicle’s value depreciates significantly, you might reach a point where you consider that it’s no longer worthwhile to maintain insurance coverage for potential physical damage it may incur. This decision is often driven by the desire to reduce expenses. To provide a general reference point, the average cost of minimum liability-only auto insurance in the US is $622. On the other hand, the average cost for a full coverage policy, which includes Collision, Comprehensive, and Liability coverage, is $2,014. By discontinuing physical damage coverage, you can potentially achieve substantial savings on your insurance premiums.

This term is more common in commercial vehicle insurance policies than personal policies. Companies also can buy physical damage coverage to protect their trucks, vans and various other types of vehicles. Furthermore, instead of full Comprehensive coverage, they can opt for a more cost-effective alternative known as “fire and theft with combined additional coverage (CAC)” available for commercial vehicles. This type of coverage provides protection for a narrower range of risks that allows businesses to tailor their coverage to their specific needs while potentially reducing their insurance costs.

In other words, commercial physical damage insurance may include Collision and Comprehensive coverage. Alternatively, a limited comprehensive coverage known as “fire and theft with CAC” can replace the full Comprehensive coverage. For example, fire and theft with CAC usually doesn’t include windshield or glass coverage.

Frequently, the term “physical damage” is employed to convey the concept of needing insurance to safeguard your vehicle, rather than continually specifying “Collision and Comprehensive.” Using the phrase “physical damage” not only clarifies the purpose of the coverage but also inherently encompasses both Collision and Comprehensive protection. But it is not a coverage on its own and therefore you won’t see any reference to it in your policy’s declaration page.