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 physical damage section. Unlike liability (Part A) and medical/UM (Parts B and C), Part D pays for damage to the insured's own vehicle. It is first-party, property-style coverage written on an actual cash value (ACV) basis, and it is the only Part that lenders care about - a lienholder requires it before financing a car.

Part D contains two distinct insuring agreements, each purchased separately and each carrying its own deductible:

• Collision coverage - the upset of your covered auto or its impact with another vehicle or object.
• Other Than Collision (OTC) coverage - sometimes called comprehensive; everything else listed as a covered peril.

A key exam point: a vehicle can carry OTC without collision, but in practice insurers rarely sell collision without OTC. Each coverage applies to your covered auto and to a non-owned auto (a borrowed or rental vehicle used by an insured), giving the broadest of the two coverages that apply to any owned vehicle.

Collision Defined

The PAP defines collision as "the upset of your covered auto or its impact with another vehicle or object." The defining feature is impact or upset. Hitting a guardrail, rolling the vehicle, backing into a pole, or colliding with another car are all collision losses regardless of fault. Because collision is fault-neutral, an at-fault driver who has no liability claim against them still collects under their own Part D, subject to the deductible.

Other Than Collision (OTC)

OTC is defined by exception - it is loss to your covered auto not caused by collision. The PAP then lists examples so the trigger is unmistakable:

The classic exam trap: striking a deer is OTC, but swerving to miss the deer and hitting a tree is collision. The trigger is whether the loss resulted from impact/upset of the vehicle itself versus contact with an animal.

Loss Settlement and ACV

Part D is an actual cash value 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 the property with other property of like kind and quality. ACV is typically computed as replacement cost minus depreciation.

Worked example. A 2019 sedan with a replacement cost of $28,000 has depreciated 40%. The insured carries a $500 collision deductible and totals the car.

• ACV = $28,000 - (40% x $28,000) = $28,000 - $11,200 = $16,800
• Less deductible: $16,800 - $500 = $15,300 paid to the insured

Because settlement is ACV, the insured bears the gap between what they owe a lender and the depreciated value - the rationale for gap insurance or a loan/lease coverage endorsement.

Deductibles

Collision and OTC each carry their own deductible (commonly $250, $500, or $1,000). A higher deductible lowers premium because the insured retains more of each loss. Several losses are paid without a deductible: glass breakage repaired rather than replaced, and the Transportation Expenses sublimit, which reimburses rental/transportation costs after a covered theft (typically $20/day up to $600) or after any other covered loss that disables the auto for more than 24 hours.

Newly Acquired and Non-Owned Autos Under Part D

Part D follows the insured to newly acquired and non-owned autos, with timing rules the exam tests. A newly acquired auto that replaces a covered auto carries the same physical-damage coverage automatically; an additional auto is covered for a limited window (commonly 14 days) only if the insurer already covers all owned autos. A non-owned auto (a friend's car or a rental) driven by an insured gets the broadest physical-damage coverage that applies to any owned auto on the policy.

Trap: If the insured carries no physical-damage coverage on any owned auto, there is nothing to extend to a borrowed or rental car under Part D - a frequent surprise that drives rental-counter "loss damage waiver" purchases.

Transportation Expenses and Total-Loss Settlement

Part D includes a Transportation Expenses additional coverage that reimburses temporary transportation (commonly $20/day up to $600) after a covered theft of the entire auto - subject to a 48-hour waiting period - and rental costs after any other covered loss that disables the auto. On a total loss, the insurer pays ACV less the deductible; the gap between ACV and a loan/lease balance is why loan/lease (gap) coverage exists.

Trap: Striking a deer is Other Than Collision (comprehensive); swerving to miss the deer and hitting a tree is collision. The trigger is impact/upset of the vehicle versus contact with an animal.