Types of Auto Insurance Coverage: Physical Damage Protection

Physical damage protection is an example of one of the types of auto insurance coverage available to consumers. It includes collision and comprehensive coverage. Both types of insurance pay for repairs to the vehicle or compensate the driver in case of a total loss, based on the car’s cash value.

Collision coverage pays for repairs to the car caused by striking an object. It also pays for damages caused in a rollover accident. Comprehensive coverage pays for repairs following other types of losses, including falling objects, stones hitting the windshield, vandalism, fire and theft.

Physical damage coverage is not required under state law but it may be a condition of arranging financing for a new vehicle. Lenders want to make sure that their interest in the vehicle is protected until the loan is paid off in full.

When buying this type of coverage for a car, it’s important to understand how the protection works. The insurance company does not pay out based on the replacement cost or what the driver paid for the vehicle. If the car is totaled in an accident or is stolen and not recovered, the insurance company will write a check for the value of the car, less the deductible the driver has agreed to pay.

Once the car loan has been paid off in full, the driver may want to drop the collision coverage and limit the comprehensive protection to fire and theft only. This measure will help the owner save money on the cost of this type of auto insurance coverage.