Physical Damage Insurance

Physical Damage Insurance is coverage for damage or theft of the vehicle you own. If you cause an accident and there is extensive damage, you are responsible for fixing or replacing that vehicle. If the accident is determined to be the other party’s fault, most likely the other party’s insurance will cover the damage to your vehicle. However, insurance companies can take longer than you’d like to accept liability, send an inspector to examine the damage, and pay for the damages on your car. That’s why having Physical Damage coverage on your vehicle is so important.

When your livelihood depends on being able to drive a vehicle, you need it fixed quickly to avoid a long disruption in business and cash flow.

Physical Damage policies will pay to get your car fixed, regardless of who’s at fault for the accident. You can file a claim with your own carrier immediately instead of waiting for the other company to acknowledge the claim. Once the other party accepts liability, the insurance companies will settle with each other over what was paid.

Public auto insurance companies that insure Taxis, Limousines, NEMT, etc. don’t always offer this coverage as part of the Auto Liability package. Many public auto carriers do not offer physical damage coverage on their policy. They have found that public auto fleet owners would rather risk paying out of pocket than to pay for the insurance. This is a personal choice for any fleet owner, and this type of coverage is not required by law.

When Should I Buy Physical Damage Insurance Coverage?

There are a few factors to consider before purchasing collision insurance coverage, let’s take a look at them:

  • How old is your vehicle?
  • How many miles are on your vehicle?
  • Are you financing, leasing, or do you own the vehicle outright?

The age and condition of your vehicle are key factors that weigh heavily into the current value of your vehicle. The current value of your vehicle has everything to do with whether or not you should insure the car. For instance, if you have a 15-year-old car with low mileage that is worth about $2,000 and you own it outright, you are most-likely better off not purchasing coverage and paying out of pocket for any damage or theft.

The reason for this is that all Physical Damage policies have a deductible (standard in the industry is $1,000). Once you factor in the cost of the premium, plus the deductible – you’re better off applying that money toward fixing the car on your own. Or to replace it altogether because you’re paying more in deductibles & premium than what the car is actually worth. If you own newer vehicles that are financed through a lease or loan, most likely the finance company will require physical damage coverage.

How Much Does Physical Damage Insurance Cost?

Most insurance companies base physical damage premiums on the value of your vehicle and garaging address & quality of your drivers. This line of business is much easier to give a ballpark indication for than any other kind of insurance. Premiums tend to run about 5% to 12% of the vehicle value, plus taxes and fees if the insurance carrier is non-admitted. Here are some examples of how that might translate;

2015 Toyota Prius in a rural area with an admitted carrier (no taxes & fees):

  • Vehicle Value: $17,000
  • Insurance Rate 5%
  • $17,000 X 5% = $850 per year
  • Financing: 20% Down Payment: $170
  • 9 Monthly Installments: $75.50 / month
  • $1,000 deductible per claim

2010 Ford Interceptor in a major city with a non-admitted carrier:

  • Vehicle Value: $11,000
  • Insurance Rate 10%
  • $11,000 X 10% = $1,100 per year +
  • $350 State Taxes & Surplus Lines Fees
  • Financing: 20% Down Payment including T&F full in down: $570
  • 9 Monthly Installments: $98 / month
  • $1,000 deductible per claim

There are all kinds of scenarios that we can look at, but these are the basic formulas the come into play. Another important fact to mention is that most carriers have minimum premiums per vehicle (most commonly they range from $500-$850 per car, per year). You should be able to see now, that insuring a car worth $2,000 would cost you about $1,000 per year for the coverage. Then, if you have an accident you are responsible for a $1,000 deductible on top of that. Ultimately, you’re in the driver seat and it’s up to you whether insuring a vehicle worth $2,000 makes sense. You’re basically trading dollars with the insurance company for the same amount in deductibles & premiums.

How Much Does Physical Damage Insurance Cost?

From time-to-time we get calls from customers who are asking for “full coverage.” Because we hear this often, we know what you mean - you want your policy to have Liability and Physical Damage Insurance coverage. You want as much coverage as possible. Public auto policies tend to be on the more expensive side because the cars are on the road more often, as are the drivers and as a result, there are more accidents.

Accidents drive up pricing for all insurance companies everywhere as that is the bulk of their overhead. Because it is so common for public auto business owners to forego “full coverage” to keep their insurance costs down, proposals and policies very often leave this coverage off. As licensed agents, we are concerned primarily with balancing the best coverage with the best price. Feel free to call or email us for a comprehensive review of your policy. This ensures that we are offering you the coverage and pricing you expect. Check your policy now and see if “Physical Damage” or “Comprehensive & Collision” coverage are included on your declarations page. If not, we’ll do a free review of your physical damage insurance policy to research why that is, and if we can fill any gaps in coverage.