When you buy car insurance, it is a smart move to add physical damage insurance into your policy. Collision coverage will pay for your car’s damage after a wreck, while comprehensive coverage will pay for damage from non-accident hazards. This coverage can provide instrumental help as you try to afford repairs to your car, or even a replacement vehicle, following unexpected damage.
However, both collision and comprehensive insurance will contain terms and limits that will restrict both when you can receive coverage from your plan and how much your policy will pay you.
Consider the common insurance terms that you might find in your policy, and how these might affect your eventual payout for vehicle damage.
Actual Cash Value (ACV) Coverage
Most standard physical damage coverage compensates drivers based on a car’s actual cash value. This is the used value of the car at the time of an accident. So, if you total a five-year-old car, then your payout will be based on the value of that older car, not the cost you paid for the new car.
Replacement Cost Value (RCV) Coverage
If you want more coverage than actual cash value insurance will provide, then you might be able to upgrade your physical damage coverage to replacement cost coverage. If you total your car, then this will pay your settlement based on the like-new value of a similar vehicle. Therefore, you’ll receive more compensation that you can put towards the cost of a new car.
Both RCV and ACV policies will be subject to deductibles. A deductible is an amount of money that you agree to pay towards your own damage costs before your policy pays its share.
For example, if you have a $500 deductible and a wreck causes $2,500 in vehicle damage, then you pay for the first $500 of repairs and your policy will pay the remaining $2,000. Damage that costs less than the cost of the deductible will not have coverage. Always choose a deductible value that you can afford.
One limitation of car insurance that you must remember is that there are exclusions on when your physical damage coverage will pay for damage.
For example, your plan will not pay for damage from any normal wear & tear, since these are losses that you could minimize. Nor will it pay if you wreck your car while committing a criminal act. Additionally, your plan might limit coverage on certain custom features that you added to the car, like special rims.
Though your physical damage insurance contains different terms and conditions, it still is a benefit that can protect your car from countless damage risks. Your South Carolina insurance agent is committed to helping you design the coverage that is best for you, and you can trust us to help you maximize your potential payout following vehicle damage.