7.1 Part D - Coverage for Damage to Your Auto

First-Party Coverage for Your Own Vehicle

Part D - Coverage for Damage to Your Auto is the physical damage section of the ISO Personal Auto Policy (PP 00 01). Unlike Part A liability (which pays third parties for damage you cause), Part D is first-party coverage: it pays you to repair or replace your own vehicle, regardless of who was at fault. Because it protects the insurer's collateral interest, a lienholder or lessor is almost always added as a loss payee (endorsement PP 03 23).

Part D contains two distinct coverages an insured may buy separately or together:

Note the classic trap: striking a deer is OTC (comprehensive), not collision, even though there was an impact. Swerving to avoid the deer and hitting a tree is collision.

Comprehensive (OTC) vs. Collision

Insurers and exams often label OTC as "Comprehensive" or "Other Than Collision." It is the broader of the two: it covers nearly every cause of loss except collision and the named exclusions. Glass breakage may be settled under OTC; many policies offer a full-glass / no-deductible glass option so windshield repairs do not erode the deductible.

Key definitional points the exam tests:

• Loss to a covered auto from contact with a bird or animal = OTC.
• Breakage of glass caused by a covered collision may be settled as collision at the insured's option, so only one deductible applies.
• Missiles or falling objects, fire, theft or larceny, explosion, earthquake, windstorm, hail, water, flood, malicious mischief or vandalism, riot or civil commotion are all OTC perils named in PP 00 01.

Neither coverage is mandatory by state law; both are typically required by a lender while a loan or lease is outstanding. When the loan is paid off, the insured may drop physical damage entirely ("liability only").

How Part D Pays: ACV, Limits, and Deductibles

Part D's Limit of Liability is the lesser of (1) the Actual Cash Value (ACV) of the stolen or damaged property, or (2) the amount necessary to repair or replace the property with other property of like kind and quality. The PAP is an ACV contract for the vehicle - not replacement cost. ACV is generally computed as:

ACV = Replacement Cost - Depreciation

A deductible applies to each Collision loss and each OTC loss separately. The deductible is the insured's retained portion; the insurer pays the covered loss minus the deductible, up to the limit.

Worked numeric (collision): A covered auto has an ACV of $15,000. Collision repair is estimated at $12,000 with a $500 deductible.

• Repair cost ($12,000) is less than ACV ($15,000), so the insurer values the loss at the repair cost.
• Insurer pays $12,000 - $500 deductible = $11,500.

Total Loss and the ACV Ceiling

When repair cost approaches or exceeds ACV, the insurer declares a total loss and pays ACV minus deductible, then takes title to the salvage. Many insurers apply a total-loss threshold (e.g., repairs > 70-80% of ACV).

Worked numeric (total loss): ACV = $15,000, repair estimate = $14,200, deductible = $500. Because repairs exceed the insurer's total-loss threshold, the insurer pays the lesser figure - ACV - minus the deductible: $15,000 - $500 = $14,500, and keeps the salvage.

Notice the limit is the lesser of ACV or repair, so a $20,000 repair on a $15,000 ACV car still caps recovery at $15,000 (then minus deductible). This is why the PAP never "makes the insured whole" beyond market value - a frequent distractor that students miss when they assume repair cost always controls.

Special limit: electronic equipment permanently installed but not built in by the manufacturer, and certain non-owned trailers, are subject to a sub-limit (commonly $1,500 in PP 00 01).

Coverage for Non-Owned and Newly Acquired Autos

Part D follows the PAP definitions. Physical damage on a non-owned auto (a borrowed or rented vehicle) is provided on the broadest physical damage coverage the named insured carries on any owned auto - so if the insured has Collision on one car, it extends to a temporary rental. This is why a credit card or rental-counter waiver may be redundant for someone with full Part D coverage.

Newly acquired autos are handled by the same notification windows tested in liability:

• An additional auto gets the broadest coverage on any owned auto automatically; if the insured wants Part D physical damage on it, they must usually ask within 14 days (per PP 00 01 timing) - or 4 days if the policy has no physical damage on any auto.
• A replacement auto carries the same coverage as the vehicle it replaces; to add OTC/Collision where the old car had none, notice is required within the policy's stated window.

Transportation expenses / loss of use: PP 00 01 provides a small daily/aggregate rental-reimbursement (commonly $20/day up to $600) for a covered OTC theft or other covered loss, after a waiting period - distinct from the optional, higher Rental Reimbursement endorsement many insureds add.