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 09 18) is the first-party physical damage section. Unlike Parts A, B, and C (which protect people and pay liability or injury claims), Part D pays for direct and accidental loss to the insured's own vehicle and certain non-owned autos. It is the only purely property-coverage section in the PAP, and it is entirely optional — a state may mandate liability (Part A) but never requires the owner to insure their own metal.

Part D is built on two distinct insuring agreements: Collision and Other Than Collision (OTC), which the industry traditionally calls comprehensive. The PAP defines collision as the upset of your covered auto or its impact with another vehicle or object. Everything else physical — fire, theft, falling objects, glass breakage, hail, flood, vandalism, contact with a bird or animal, and missiles — is OTC. Each peril is purchased and rated separately, and each carries its own deductible.

Collision vs. Other Than Collision

The collision/OTC distinction is the single most-tested concept in Part D, because the same event can fall in either bucket depending on facts. A car striking a deer is OTC (animal contact), but swerving to avoid the deer and hitting a guardrail is collision. Glass breakage may be settled under OTC at the insured's option to avoid two deductibles.

Why it matters: OTC is usually cheaper and carries a lower deductible than collision because OTC losses are smaller and less frequent. Misclassifying a loss can cost the insured the wrong deductible or trigger an unnecessary surcharge.

Loss Settlement, ACV, and the Deductible

Part D is an actual cash value (ACV) contract. The insurer's limit of liability is the lesser of (1) the ACV of the stolen or damaged property, or (2) the amount necessary to repair or replace it with like kind and quality. ACV is generally computed as replacement cost minus depreciation. Betterment and a stated deductible are subtracted before payment.

Worked example — total loss. A 6-year-old sedan with a replacement cost of $24,000 has depreciated 55%. The OTC (theft) deductible is $500.

• ACV = $24,000 x (1 - 0.55) = $10,800
• Less deductible: $10,800 - $500 = $10,300 paid

Worked example — repairable collision. Repair estimate is $6,200; collision deductible is $1,000. The insurer pays $6,200 - $1,000 = $5,200, capped at ACV. If the ACV were only $5,800, the insurer would declare a total loss and pay $5,800 - $1,000 = $4,800 rather than over-repair.

A higher deductible lowers premium but shifts more of each loss to the insured. Note the PAP does not use a coinsurance clause — coinsurance is a commercial-property concept (e.g., the 80% rule) and is a classic distractor on auto questions.

Transportation Expenses and Towing

Part D automatically provides Transportation Expenses of $20 per day up to $600 (PP 00 01 09 18 base limits) for a temporary substitute auto, but only after a 48-hour waiting period for theft of your covered auto, or for OTC/collision loss if the loss is covered. For theft, coverage runs until the auto is returned to use or the insurer pays for its loss. Higher limits (e.g., $40/$1,200) may be endorsed.

Towing and labor is not automatic — it is added by endorsement PP 03 03, paying for labor at the place of disablement up to a stated per-disablement limit (commonly $25, $50, or $75).

Non-Owned Autos and Limit of Liability

Part D extends to a non-owned auto — a vehicle not owned by or furnished/available for the regular use of the named insured or family members — while in the custody of or being operated by an insured. This includes a temporary substitute auto used while the covered auto is out of service for repair. Coverage on a non-owned auto follows the broadest physical-damage coverage on any vehicle on the policy; if the insured carries only collision on their own car, only collision extends to the borrowed car.

The Limit of Liability clause caps the insurer at the lesser of ACV or repair/replacement cost, but adds two reductions: an adjustment for the physical condition of stolen property, and the contractual rule that payments will not exceed the cost of like kind and quality. A diminished-value claim (the loss in resale value after a quality repair) is generally not payable under the standard PAP — another common trap.

Worked Example — Two Deductibles and Total-Loss Threshold

An insured is in a hailstorm (OTC) and the same week backs into a pole (collision). OTC deductible is $250; collision deductible is $500. These are separate losses and each deductible applies once: hail repair of $3,000 pays $2,750, and pole repair of $1,800 pays $1,300 — total $4,050 across two claims.

Insurers declare a total loss when repair cost plus salvage retention approaches ACV — many use a 70-80% threshold. If a $14,000-ACV auto needs $11,200 in repairs (80%), the carrier totals it: it pays ACV minus deductible and takes the salvage. Knowing the threshold helps explain why a repairable-looking car is "totaled."