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 (current edition PP 00 01 09 18) is the first-party physical-damage coverage. It pays to repair or replace the insured's own vehicle, regardless of fault. Part D is optional - a lienholder typically requires it as a condition of the loan, but a state will not mandate it the way it mandates Part A liability. Because it is direct first-party coverage, the carrier pays its own insured and then may pursue subrogation against an at-fault third party.

Part D contains two distinct insuring agreements, each with its own premium and its own deductible: Collision and Other Than Collision (OTC), the latter historically called "comprehensive."

Collision vs. Other Than Collision

The single most-tested distinction in Part D is the trigger that separates the two coverages. The PAP defines collision as "the upset of your covered auto... or its impact with another vehicle or object." Everything else that is not collision and not excluded falls into OTC.

The deer-strike is a classic exam trap: hitting a deer is OTC, not collision, even though it feels like an impact. Glass breakage is OTC, but the policy lets the insured elect to treat glass caused by a collision as a collision loss to avoid two deductibles.

How much the policy pays - ACV and the LKQ standard

The Part D 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 (LKQ). ACV is generally interpreted as replacement cost minus depreciation. This "lesser of" wording prevents the insured from profiting and is why a totaled older car pays its depreciated market value, not the cost of a brand-new replacement.

Key valuation rules tested on the national exam:

• An adjustment for depreciation and physical condition is made in determining ACV.
• If repair/replacement results in betterment, that amount may be deducted (a new tire replacing a bald tire).
• For a covered theft loss, the carrier pays transportation expenses beginning 48 hours after the theft is reported.
• A non-owned auto in the insured's custody is generally given the broadest coverage applicable to any covered auto shown on the Declarations.

Worked numeric - the deductible and ACV interplay

A covered auto is damaged in a collision. The insured carries Collision with a $500 deductible. The repair shop estimates $3,200 in LKQ repairs. The pre-loss ACV is $9,000.

Step 1 - Compare repair cost to ACV: repair ($3,200) is less than ACV ($9,000), so the car is repairable, not a total loss. Step 2 - Apply the limit (lesser of ACV or repair) = $3,200. Step 3 - Subtract the deductible: $3,200 - $500 = $2,700 paid.

Now assume a second scenario - the auto is a total loss from a covered fire (OTC, $250 deductible) and ACV is $9,000. The insurer pays $9,000 - $250 = $8,750. Note the deductible applies once per occurrence per coverage; if both collision and OTC damage arise from one event, only the higher deductible (or one, by company rule) typically applies.

Collision vs. Other-Than-Collision

Part D insures direct physical loss to "your covered auto" and is split into two perils:

The classic trap: hitting a deer is OTC (comprehensive), not collision, because it is contact with an animal. Each peril carries its own deductible, and an insurer pays the lesser of repair cost or ACV. Comprehensive often has a lower or zero deductible for glass.

Limits, Transportation Expense, and Loss Settlement

Part D pays the actual cash value of the damaged auto or the cost to repair, whichever is less, minus the deductible. There is no separate stated limit beyond the vehicle's ACV, so a totaled older car is paid at its depreciated value, not the price of a new one.

The Transportation Expenses provision reimburses rental/transportation costs (commonly up to $20 per day, $600 maximum) after a covered OTC theft of the entire auto or a covered loss, subject to waiting periods. Part D also covers non-owned autos the insured drives, but only with the broadest limit applying to any owned auto. Custom equipment, electronic gear, and tapes/CDs have limited or excluded coverage unless endorsed.

Deductible Mechanics and Betterment

The physical-damage deductible is subtracted from each covered loss before payment. With a $500 collision deductible and a $4,200 repair, the insurer pays $3,700. If repair cost exceeds the vehicle's ACV, the insurer declares a total loss and pays ACV minus the deductible, taking the salvage. Insurers do not apply a betterment charge for normal repair parts the way some health/property lines might, but ACV settlement on a total loss already reflects depreciation.

When two perils could apply, the insured chooses the coverage with the lower deductible — for instance, a cracked windshield is settled under comprehensive, which frequently carries a reduced or zero glass deductible.