Combined Physical Damage Coverage

DEFINITION of 'Combined Physical Damage Coverage'

An automotive insurance policy designed to provide coverage against vehicular damages caused by collisions, as well as damages caused by non-collision events. Combined physical damage coverage is used by both individuals and businesses to cover physical damages to a vehicle, and is not designed to cover personal injuries.

BREAKING DOWN 'Combined Physical Damage Coverage'

Insurance policies protect the insured against losses from specific risks over a fixed period of time. If a loss occurs that falls within the risks the policy covers, the insured can file a claim and have damages paid for up to the coverage limit defined in the policy agreement.

In some cases, the insured may purchase a variety of different policies to cover different risks, rather than purchase a single policy that covers a broad array of risks. For example, a business may purchase several specialized liability insurance policies to protect against different types of risks, such as negligence, pollution, and workers’ compensation. The insured may do this in order to better match coverage limits with the estimated frequency and severity of losses, allowing the insured to potentially limit the premiums paid for coverage.

While purchasing several different specialized policies may make sense for a business that has to deal with a wide range of risks, it may make more sense to purchase a comprehensive policy that combines the features of more specialized coverage into a single policy. In the case of automotive coverage, states may have minimum coverage requirements that must be met in order to legally operate a vehicle. Combined physical damage coverage is designed to meet these requirements.

Combined physical damage coverage protects the policyholder from risks that could cause damage to a vehicle. This includes protection against damages resulting from a vehicular accident. This is referred to as collision insurance, and is the risk most commonly associated with operating a motor vehicle.

A combined physical damage coverage policy also includes either comprehensive insurance or fire and theft insurance. Comprehensive insurance provides coverage against damages caused by something other than a collision, such as theft, fire, vandalism, window breakage, animals, or weather-related damages. Fire and theft insurance provides more limited coverage than comprehensive coverage, and wouldn’t cover broken windows.

Combined physical damage coverage can be purchased by an individual operating a vehicle for personal use, or by businesses operating one or more vehicles for commercial purposes. This type of policy will require the insured to pay a deductible before the insurer pays any funds, with lower deductible policies typically carrying a higher premium than policies in which the insured pays higher out-of-pocket expenses.