Why You Need A Physical Damage Coverage for Your Truck

Strong Tie Insurance November 5, 2019 Commercial Truck Insurance

Most states only require a liability-only commercial insurance policy. Liability insurance protects your business in the case that one of your drivers cause an accident. If someone talks about having minimum coverage, they are typically referring to only carrying liability. Of course, in many cases, having additional coverage is crucial, especially for commercial truck drivers.

When someone talks about having full coverage, they typically mean having both liability and physical damage coverages. While liability insurance is intended to cover damages and injuries caused to other people, physical damage insurance protects your vehicle.

There are two types of physical damage insurance: collision and comprehensive. Adding any kind of physical damage insurance to your policy creates more protection for you, but will increase the cost of your overall insurance policy.

The Difference Between Collision and Comprehensive Insurance

Collision Insurance is used when there is a collision with another vehicle or object. Collision insurance includes damage to your truck caused by hitting a large pothole, rolling, hitting another vehicle, or running into a guard rail, for example.

Comprehensive insurance is used when damage happens to your truck that is not necessarily a product of collision. For example, if a tree falls on your hood, your flatbed is vandalized, or other acts of god create a problem, your comprehensive policy kicks in. Most people, if only choosing one type of physical damage insurance, go with comprehensive coverage since it seems to cover more items, like theft or terrorism.

The most significant difference between these two types of policies is the extent of the driver’s control. When the driver is in control, the damage will fall under collision. If the accident happens to the driver, it’s more likely to fall under comprehensive.

Read More: 5 Things You Need To Know About Motor Truck Cargo Insurance

Can You Forego Physical Damage Coverage for Your Commercial Truck?

It’s tempting to keep your insurance as inexpensive as possible. Whether you pay yearly, quarterly, or monthly, those insurance payments can hurt. It is certainly worth examining your entire insurance plan to see if there are ways to cut corners, but you don’t want to do so at higher risk to your business.

Before you decide to forego having some kind of physical damage insurance for your fleet, here are some things to consider:

  • Are leasing or financing your vehicle?

If your truck is financed, your lender will most likely require full coverage so long as you owe a balance on your loan. The same may be true if you are leasing the vehicle. In either of these cases, you may be required to carry both comprehensive and collision insurance.

Until you pay off the loan, your bank technically owns the truck. They want to protect their investment in case there is damage to the vehicle. In some cases, if you don’t add physical damage insurance to your policy, your bank will add their own to your payments. Most of the time, the bank’s insurance policy will be most more expensive and much less flexible than find a plan of your own.

  •  How old is your commercial vehicle?

If you use an older vehicle with high mileage, your truck may not be worth as much as you think. Vehicles depreciate in value each year. The amount that an insurance company would provide to fix or replace your damaged truck might end up not being worth what you pay in monthly premiums, especially if you carry a higher deductible.

Let’s say that your truck is only worth a couple of thousand miles. Even if it’s in great shape, the actual cash value may be low. The amount you pay in monthly premiums might pay the vehicle’s worth in a few months or years. When you consider the amount you have to pay before insurance actually kicks in, it may not be worth keeping your additional coverage. On the same note, physical damage premiums are often based on the value of the car, so it should print the price down.

If you have a newer vehicle, the cost to repair or replace your truck will most likely be too high not to have the appropriate protection. You must evaluate the whole picture to determine the best decision for your needs.

  • What is your financial situation?

Some companies find themselves in positions where they have the cash on hand to replace a vehicle if needed. Other companies would end up in ruin or great debt if they have to pay out-of-pocket. Knowing your own financial situation allows you to understand what is possible.

The company that is in a position to replace a lost vehicle might decide to forego adding physical damage insurance to their policy. They are, of course, taking a risk, but it might be a more manageable risk to handle because they have the means to bounce back. The company that would incur significant debt or financial ruin may find that skipping a physical damage policy is far too much of a risk.

Even if you believe your company could handle the loss of a truck, you should take a serious look at your financial situation. You may decide that you can handle most repairs in-house and don’t need extra coverage, but you should consider what happens in the worst-case situation: the complete loss of a vehicle. Completely replacing a truck can cost a small fortune, and the transaction might take a while.

Having at least some kind of physical damage insurance ensures you don’t have to make hasty decisions to stay on the road. It’s essential to look at all of the options to make the best decision.

Read More: Commercial Truck Insurance: Protect Your Business And Your Employees

 

Getting The Best Policy For Your Company

Purchasing or updating your commercial insurance policy can be overwhelming. It’s easy to simply stick with the same company year after year. To ensure that you’re getting the best deal, it’s crucial to evaluate your needs every so often. Make sure to take some time at least once a year to audit your policy and determine if it still meets your needs. Shop around to confirm you are getting the best price.

When in doubt, talk to an experienced insurance provider to see what may be the best option for your needs. While insurance makes up a considerable part of your budget, it’s something you can’t afford to skip.

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