Physical Damage Coverage for Commercial Vehicles

What Physical Damage Insurance Covers

Physical damage insurance covers repair or replacement costs for the carrier's own vehicles when they are damaged or destroyed. Unlike liability insurance, which pays for injuries and damage to others, physical damage pays for damage to your trucks, tractors, and trailers.

Physical damage is not required by FMCSA, but it is almost always required by lenders or lessors who finance the equipment. Even carriers that own their equipment outright often carry physical damage coverage because the cost of replacing a commercial vehicle can be $100,000 to $200,000 or more.

Types of Physical Damage Coverage

Collision Coverage

Collision coverage pays for damage to your vehicle caused by a collision with another vehicle or object, regardless of fault. Common covered events include:

• Rear-ending another vehicle or being rear-ended
• Striking a guardrail, bridge, or other fixed object
• Overturns and jackknife accidents
• Hitting a pothole or road debris (in some policies)

Comprehensive Coverage

Comprehensive coverage pays for damage caused by events other than collision. This includes:

• Fire: Engine fires, electrical fires, or arson
• Theft: Stolen vehicles or parts
• Weather: Hail, wind, flooding, tornado, or hurricane damage
• Vandalism: Intentional damage by third parties
• Glass breakage: Windshield and window damage
• Animal strikes: Collisions with deer or other animals

Specified Perils Coverage

Specified perils is a more limited version of comprehensive that covers only the specific risks named in the policy (such as fire, theft, and windstorm) rather than all non-collision events. It is less expensive than comprehensive but leaves gaps for uncovered events.

Valuation Methods

How the insurer values your vehicle determines what you receive after a total loss:

• Actual Cash Value (ACV): The market value of the vehicle at the time of loss, accounting for depreciation. This is the most common valuation method and may result in a payout lower than what you owe on a loan.
• Stated Amount: You and the insurer agree on a value when the policy is written. The insurer pays the lesser of the stated amount or the cost to repair/replace.
• Replacement Cost: The insurer pays the cost of a comparable replacement vehicle without deducting for depreciation. This provides the highest payout but costs more in premium.

Deductibles and Cost Management

Physical damage policies carry deductibles that the carrier must pay before insurance kicks in. Common deductible levels:

• $1,000 to $2,500: Standard for most small and mid-size fleets
• $5,000 to $10,000: Higher deductibles for larger fleets that can absorb smaller losses
• $25,000+: Large fleets may self-insure smaller losses entirely

Choosing a higher deductible reduces your premium but increases your out-of-pocket cost per claim. The right balance depends on your fleet size, cash reserves, and claim frequency.

What Physical Damage Does NOT Cover

Physical damage insurance excludes:

• Mechanical breakdown: Engine failure, transmission problems, or wear and tear (mechanical breakdown insurance is a separate product)
• Cargo: Freight on the vehicle requires a separate cargo policy
• Liability to others: Damage you cause to other vehicles or property is covered by liability insurance
• Personal belongings: Driver's personal items in the cab are generally not covered

When building your insurance program, physical damage should be considered alongside liability, cargo, and other coverages. See our insurance shopping guide for help assembling a complete package.