7.1 Part D: Coverage for Damage to Your Auto

Part D: Coverage for Damage to Your Auto

Part D of the ISO Personal Auto Policy (PAP, form PP 00 01) is the physical damage section. Unlike Liability (Part A) and Medical Payments (Part B), Part D is first-party coverage that pays for damage to the insured's own vehicle, regardless of who caused the loss. It is optional in most states, but lenders require it whenever a vehicle is financed or leased, and they are listed as a loss payee on the Declarations so settlement checks name them too.

The term covered auto drives the entire section. It means any vehicle shown on the Declarations, a newly acquired auto, a trailer the insured owns, and a temporary substitute auto used while a covered auto is out of service for repair, servicing, loss, or destruction. Knowing this definition is essential because Part D only pays for damage to a covered auto.

The Two Coverages

Part D splits into two coverages, each shown separately on the Declarations with its own deductible. They are purchased and rated independently, so an insured can carry one without the other:

• Collision - the upset (rollover) of your covered auto or its impact with another vehicle or object. A single-car rollover with no other vehicle involved is still Collision.
• Other Than Collision (OTC) - sometimes called Comprehensive; covers nearly everything else: fire, theft, vandalism, glass breakage, falling objects, missiles, hail, windstorm, flood, explosion, earthquake, riot, and contact with a bird or animal.

Because Collision premiums are higher, many drivers of older cars drop Collision but keep the cheaper OTC to protect against theft and weather.

Distinguishing Collision from Other Than Collision

The exam tests the dividing line constantly because the two coverages usually carry different deductibles (OTC deductibles are typically lower). The PAP resolves ambiguity with a key rule: if a loss could be either, it is deemed Other Than Collision.

Classic OTC perils explicitly listed in the form include: missiles or falling objects; fire; theft or larceny; explosion or earthquake; windstorm; hail, water, or flood; malicious mischief or vandalism; riot or civil commotion; contact with a bird or animal; and breakage of glass.

A helpful trap: hitting a deer is OTC (contact with an animal), but swerving to avoid a deer and striking a tree is Collision. Glass breakage from a collision may be claimed under Collision at the insured's option to avoid a second deductible.

More dividing-line examples the exam reuses: a tree limb falling on a parked car is OTC; backing into your own garage door is Collision; a flood submerging the car is OTC; a chain-reaction rear-end crash is Collision. When a single event produces both - say a fire that starts after a crash - the insured may apply the loss to whichever coverage is most favorable, normally the one with the lower deductible.

Worked Example - ACV and the Deductible

Part D pays the lesser of (1) the amount needed to repair or replace the property, or (2) the Actual Cash Value (ACV) of the stolen or damaged property - minus the deductible. ACV is replacement cost minus depreciation; the PAP does NOT provide replacement-cost settlement on the vehicle itself.

Because the repair cost ($21,500) exceeds ACV ($18,000), the insurer declares a total loss and settles on the $18,000 ACV figure, then subtracts the $500 deductible. The insured nets $17,500 and the insurer takes the salvage.

Contrast a repairable loss: if that same $18,000 car suffered only $4,000 in OTC hail damage with a $250 deductible, the insurer pays $4,000 - $250 = $3,750, because repair cost is now less than ACV. To avoid the ACV depreciation gap on financed cars, an insured can add GAP (Guaranteed Asset Protection) or a Loss Payable / Auto Loan-Lease endorsement, which pays the difference between ACV and the outstanding loan balance after a total loss.

Sub-Limits and Transportation Expense

Part D contains built-in sub-limits the exam loves:

• Electronic equipment not permanently installed (custom stereo gear) is limited; permanently installed equipment is covered.
• Non-owned autos (a borrowed or rented car used by the insured) get the broadest Part D coverage already carried on any owned vehicle.
• Transportation Expenses pays a stated daily/aggregate limit (commonly $20/day, $600 maximum) for a rental after a theft of the entire covered auto, with a 48-hour waiting period; this limit can be increased by endorsement to cover loss of use after any covered loss.

A newly acquired auto is covered if reported within the policy's grace period (typically 14 days), but if the insured carries no physical damage coverage on any existing vehicle, a new car gets only a limited default ($0 after deductible unless reported).

Collision, Other-Than-Collision, and How Losses Settle

Part D - Coverage for Damage to Your Auto provides physical-damage coverage in two perils the exam keeps distinct. Collision is the upset of the auto or its impact with another vehicle or object. Other than collision (OTC, or comprehensive) is every other direct loss, expressly including fire, theft, vandalism, falling objects, missiles, explosion, earthquake, windstorm, hail, water, flood, malicious mischief, and contact with a bird or animal. The classic distinction: striking a deer is OTC, but swerving to avoid the deer and hitting a tree is collision.

Glass breakage may be settled as either, and many policies waive the deductible for glass-only repair.

Each coverage is written with its own deductible, and Part D settles at the lesser of the actual cash value of the stolen or damaged property or the amount necessary to repair or replace it, minus the deductible. Because ACV reflects depreciation, an older vehicle can be declared a total loss when repair cost approaches its ACV, and the insurer pays ACV minus the deductible. Part D applies to the covered auto and non-owned autos the insured operates, extending the broadest physical-damage coverage carried on any owned auto to a borrowed or rented car.

Part D excludes wear and tear, freezing, mechanical or electrical breakdown, road damage to tires (unless caused by a covered peril), and loss to a vehicle used as a public or livery conveyance, paralleling the commercial-auto physical-damage exclusions.

Worked scenario: a hailstorm dents a covered auto ($3,000 repair) and the same week the insured backs into a pole ($2,500 repair). The hail is an OTC loss settled under the comprehensive deductible, and the pole impact is a collision loss settled under the collision deductible; each draws on its own deductible and is not combined. If the car's ACV were only $2,800, the repairs approaching that value could make it a total loss paid at ACV minus deductible. Sorting each loss into collision or OTC and applying the correct deductible is the core Part D skill.

Key Takeaways

Part D physical damage covers collision (upset or impact) and other-than-collision (fire, theft, vandalism, weather, flood, animal contact), each with its own deductible, and settles at the lesser of ACV or repair cost minus the deductible. Hitting an animal is OTC; swerving and hitting an object is collision. Coverage extends to non-owned autos at the broadest level carried on an owned auto, and a newly acquired auto needs reporting within the grace period to keep physical-damage coverage.