When Do I Need Physical Damage Coverage for My Car?

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Physical damage coverage is a category of auto insurance that covers damage to your vehicle from car accidents and other sudden, unexpected causes. It is not required by law, but you may need physical damage coverage if you are financing or leasing your car.

Keep reading for more information about what physical damage insurance covers and whether it’s necessary for your vehicle.

Key Takeaways

  • Physical damage insurance, which consists of collision and comprehensive coverage, pays to repair your car after a crash or unexpected peril.
  • Collision insurance covers damage to your car after an accident even if you were at fault, while comprehensive insurance covers fire, hail, theft, vandalism and more.
  • Most physical damage coverage policies pay out total losses at your car’s actual cash value after you pay your deductible.
  • Physical damage insurance is not required by law in any state but it may be required by your lender or lessor if you are financing or leasing your car.
  • Americans paid $544.99 on average for collision and comprehensive coverage in 2020.

What Types of Physical Damage Coverage Are There?

There are two main types of physical damage coverage you can purchase to protect your vehicle: collision coverage and comprehensive coverage.


Collision insurance can pay for repairs to your vehicle after a car accident regardless of who was at fault. It is the only type of auto insurance that covers your car repairs after a collision you were responsible for. For example, it could help you pay to fix your front bumper after you miss a stop sign and crash into another car.

You could also file a claim on your collision insurance after an accident caused by another driver.

However, this could cause your rates to go up unless you live in California or Oklahoma, where it is illegal for insurance companies to raise your rates after an accident you weren’t responsible for.[1][2] As a result, it may be better to file a claim on the other person’s liability insurance if they were the at-fault driver.


Comprehensive insurance covers sudden and unexpected damage to your vehicle from a source outside of your control. Sometimes known as “other than collision” coverage, it accounts for most forms of non-collision damage to your car. These can range from natural disasters like wildfires and hailstorms to human actions like theft and vandalism.

collision versus comprehensive car insurance infographic

A subset of comprehensive coverage known as fire and theft with combined additional coverage (CAC) is reserved for large commercial trucks and only covers damage from perils specifically named in the policy.[3]

How Does Physical Damage Insurance Work?

You must regularly pay your premiums to maintain your comprehensive and collision coverage. Whenever you get into an accident, you will have to pay your deductible before your insurer will chip in. For example, if you have a $500 deductible and you cause $2,000 worth of damage to your car in an accident, then your insurance company would contribute $1,500 for your repairs.

In the event of a total loss, most policies would reimburse you at your car’s actual cash value (ACV), which is the value of your car when taking depreciation factors like age or wear and tear into account. However, you could receive enough money to buy a new vehicle after a total loss if you purchase an optional car insurance add-on called new car replacement insurance.

actual cash value in car insurance policy

What Does Physical Damage Insurance Cover?

Physical damage insurance covers a wide range of collision and non-collision damages. Below are some examples of situations that would be covered by your collision insurance:

  • Collision with another vehicle: You fail to check your mirrors and crash into another car while trying to switch lanes on the highway.
  • Collision with an object: You doze off at the wheel and crash into a tree.
  • Single-car rollover: You spin out after driving too fast on an icy road and flip your car over while trying to regain control of the vehicle.

Meanwhile, the following perils would be covered by your comprehensive insurance:

  • Fire: Your propane grill explodes in your garage and sets your car on fire.
  • Hailstorm: A chunk of hail creates a large dent in the roof of your car.
  • Windstorm: A tornado blows a tree branch through your windshield.
  • Theft: An intruder damages your car’s electrical system while attempting to hotwire it.
  • Vandalism: Your ex keys the side of your car and punctures your tires after your breakup.
  • Civil disturbance: Your car gets flipped over by a group of rioters.
  • Falling objects: A meteor falls on your car and destroys your engine.
  • Collision with an animal: Your front bumper and headlights are damaged after a deer runs into your vehicle.

What Isn’t Covered?

Physical damage coverage typically won’t pay for anything that is already covered by another insurance type or that isn’t covered by car insurance in general. Below are some circumstances that aren’t covered by physical damage auto insurance and whether they are covered by another type of insurance.



Covered By?

Someone else’s medical bills, lost wages and/or funeral expenses after an accident you were responsible for

You strike a pedestrian while texting and driving

Bodily injury liability coverage

Your medical bills and/or funeral expenses

You get whiplash and need to see a doctor after rear-ending another vehicle

Medical payments coverage or personal injury protection (also covers lost wages)

Someone else’s car or property repairs after an accident you were responsible for

You speed out of your driveway to try to get your kids to school on time and run over your neighbor’s mailbox in the process

Property damage liability coverage

Medical expenses and/or repairs after an accident caused by an uninsured driver

Someone without insurance hits your car in a parking lot then drives away

Uninsured motorist coverage

Medical expenses and/or repairs that exceed the at-fault driver’s policy limits

You rack up $30,000 in hospital bills after an accident caused by someone with $25,000 worth of bodily injury liability coverage

Underinsured motorist coverage

Outstanding loans on a lost vehicle

Your insurance company pays you $25,000 after your car is totaled but you still owe $30,000 to your lender

Gap insurance

Rental costs

Your car is destroyed in a fire and you need to rent a car while you wait for an insurance payout that you can use to buy a new vehicle

Rental reimbursement coverage

Damage from a mechanical or electrical breakdown

Your brakes stop working due to an internal failure rather than an external cause

Mechanical breakdown insurance

Tows, jumpstarts, fuel delivery, locksmithing services and/or emergency tire replacements

You run over a nail on the way to work and need to get your tire replaced

Roadside assistance plan

Belongings stolen from your vehicle

Someone steals your car while your laptop is inside

Homeowners or renters insurance

Routine repairs and maintenance

You take your car to a local auto shop for its routine inspection

Not covered by insurance

Do I Need Physical Damage Insurance?

Physical damage insurance is not required by law in any state, although your lender may require you to purchase collision and comprehensive coverage before approving you for a car loan. However, if you have finished paying off your car or can afford to pay for your car upfront, you are not obligated to buy physical damage coverage.

Nevertheless, physical damage coverage is generally a wise investment since it steps in when there isn’t another at-fault driver whose insurance can cover your repair bills.

But, as your car gets older and loses value, physical damage insurance may eventually cease to be economical. It will likely be worth dropping collision and comprehensive coverage once their premiums cost more than 10 times the value of your car.[4]

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How Much Does Physical Damage Insurance Cost?

The average American in 2020 paid $370.73 a year for collision coverage and $174.26 a year for comprehensive coverage. Meanwhile, the average annual cost for a full coverage policy with both physical damage insurance and liability insurance was $1,176.18.[5]

Your premium can vary depending on factors like the age and model of your car, your driving record and claims history, where you live and, in some cases, your credit score. Be sure to compare rates using an insurance marketplace like SmartFinancial to find the best physical damage coverage for your circumstances and budget.

How To File a Physical Damage Claim

If your car is damaged by an accident or unexpected peril, you can take the following steps to file a car insurance claim through your physical damage coverage:

  1. Call 911 to report any injuries and have an officer write up a police report.
  2. Take photos of the damage and any other relevant features of the accident scene.
  3. Contact your insurance provider and submit relevant photos and documents.
  4. Check your deductible and use Kelley Blue Book to estimate your car’s ACV so you can get an idea of how much money you can expect from your insurance company.
  5. Get an estimate from a repair shop.
  6. Accept your insurance payout and get your car fixed.


Is physical damage coverage required?

Physical damage coverage is not required by law in any state but it may be required by your lender or lessor if you are financing or leasing your car.

Do fire and theft fall under physical damage?

Fire and theft should be covered by your comprehensive insurance, which is a type of physical damage coverage.

Who needs physical damage insurance?

You need physical damage insurance if you are financing or leasing your car and you may want to keep it as long as your car is worth more than 10 times the cost of your premiums.[4]


  1. California Department of Insurance. “Automobile Insurance Information Guide.” Accessed April 11, 2023.
  2. Oklahoma Insurance Department. “A Guide to Dealing With Auto Insurance & Accidents,” Page 6. Accessed April 11, 2023.
  3. Direct Auto Insurance. “Explaining Commercial Auto Insurance.” Accessed April 11, 2023.
  4. Insurance Information Institute. “Nine Ways To Lower Your Auto Insurance Costs.” Accessed April 11, 2023.
  5. National Association of Insurance Commissioners. “2019/2020 Auto Insurance Database Report.” Accessed April 11, 2023.

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