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Damage or Physical Loss Coverage in an Auto Policy

General Article

Every auto policy comes with physical loss coverage provision that is also one of the first party coverage included in a policy. Basically, this provision is divided into two categories – damage or loss due to collision and damage or loss due to non-collision.

As some of us are aware and familiar with the term collision coverage, also called comprehensive coverage – although this term is no longer in use – any damage caused to the covered auto due to direct impact with another vehicle or property is covered by the insurance company. The limit to these coverages are set largely by the exclusions in the insuring agreement. According to the agreement, the insurer will pay for direct loss of the covered auto as well as any auto that is non-owned but included in the coverage. For all loss that is due to reasons other than collision, the payment is made only if the declaration shows that coverage applies to non-collision loss as well.

The insuring agreement in a regular auto insurance Chicago IL has details about what is covered and what is not covered that are defined under non-collision category. In most policies, following are the covered perils.

  • Fire
  • Windstorm
  • Theft
  • Water, flood, hailstorm
  • Riot or vandalism
  • Glass breakage

The way in which these perils are drafted in a typical auto policy makes it unclear whether perils other than the above are covered. The fact is, the list of items that are mentioned in the policy falls under nonexclusive coverage. The rest of the perils are covered as well unless they are specifically mentioned in exclusions. The policy may extend this coverage to non-owned vehicles as well. Non-owned vehicle constitutes of any vehicle driven by the insured that is not owned but used as a substitute vehicle in times of breakdown, servicing, repair, loss or destruction of the owned and covered vehicle.

Certain auto policies offer additional coverage during damage or physical loss of covered auto. This provision may vary from one insurance company policy to another. One of those coverage is transportation expense. For instance, a typical ISO auto policy provides for up to $15 per day with maximum limit as temporary transportation expense. This coverage only applies if the underlying loss or damage is covered. The limit to this coverage depends on the policy; higher limits are available with higher premium. Again, there are variations in how the expense is paid or when and how much is covered. For example, if the loss is due to theft, expense is covered starting from the first 48 hours after the theft and ending when the insurer pays for the loss or the auto is recovered. For the rest of the cases, the coverage starts after 24 hours. There can also be limitations based on the reasonable amount of time it would take to repair or replace the vehicle. All of these depends on the specific auto policy.