Physical Damage Coverage

"Collision" and "Comprehensive" coverages, which are also known as physical damage coverage, pay for repair or the actual cash value of your auto regardless of who is at fault. There are three basic types of physical damage coverage that business owners may purchase: collision, comprehensive, and specified perils.

Collision Coverage. This protects your car if it collides with an object, including another car, or if it overturns. Your own insurer will pay for such damage even if the collision is your fault. Limits are based on the actual cash value of your car and it is usually written with a deductible of $50, $100, or more.

In addition, collision premiums are based on the make and model year of your car. You should evaluate the current market value of your car and your ability to afford a similar car should it be destroyed before you purchase this coverage. You may not need this coverage if your car was decreased in value or if you can afford to replace it.

Comprehensive (also called other than collision) Coverage. This protects your car against almost all damage except loss caused by collision. This includes fire, theft, missiles, glass breakage, falling objects, explosion, earthquake, civil commotion, or colliding with a wild bird or animal. It is based upon the actual cash value of the car and can be written with a deductible.

Specified Perils

Because comprehensive covers so many perils, it can be very expensive. For businesses that want this broad coverage, a less expensive alternative is specified perils coverage. This is sometimes called "fire, theft, and combined additional coverage" or "CAC." It covers many of the perils comprehensive covers, except windshield damage, but it does so on a named peril basis.

Your insurance agent may suggest that one way to cut down on auto insurance premiums is not to carry any physical damage on vehicles. However, the lienholder on your vehicles generally requires collision insurance.