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Physical Damage Insurance Claims

Physical damage coverage can be included under homeowners’, automobile or commercial equipment and facilities insurance or it may be handled by a separate Physical Damage Insurance (PDI) policy.

Homeowners’ insurance covers physical damage from a variety of sources. Typical perils that are covered include loss or damage due to fire, smoke and lightning, wind, damage caused by aircraft and vehicles, falling objects, malfunction of household systems and equipment such as plumbing, furnaces or air conditioning, theft and vandalism. For loss and damage due to flooding or earthquakes, you need to take out additional coverage.

If your possessions are destroyed in a fire or other disaster, the insurance company will require you to provide documentation of your losses. It is a good idea to make an inventory of your possessions, a video of the inside of your home and take pictures of open drawers, open closets and special items. Keep receipts, appraisals and warranty cards. Ideally keep the inventory, home contents video and photographs off-site. Do not throw away badly damaged items until an adjuster has seen them. Insurers have two ways of handling coverage for physical damage. “Guaranteed replacement cost coverage” will pay for structures and items according to what they cost today, even if this is above the policy limit, although some items may still be subject to depreciation. “Actual cash value” will cover the cost of replacement minus depreciation. Policies for older buildings tend to pay for repair costs or actual cash value rather than for replacement cost.

There are two categories of coverage for physical damage of automobiles: collision and comprehensive. Collision coverage helps to pay for repairs or replacement of your vehicle after an accident. The insurer may declare a vehicle ‘totaled’ or ‘write it off’ if the repair costs are greater than the vehicle’s value. In this case they will pay you the assessed value of the vehicle. Comprehensive coverage helps protect you against damage to your vehicle from events other than collisions, including: theft, vandalism, fire and weather. Comprehensive coverage is usually transferable to rental vehicles.

For commercial and industrial equipment and facilities, physical damage coverage can be handled through general commercial insurance or through a separate PDI policy. Physical damage insurance covers loss or damage to new or used equipment due to overturn, collision, theft, vandalism, fire, vermin and natural disasters such as earthquakes, flood, hail and wind.

Compare the physical damage coverage offered by different insurance companies and policies as the rates, amount of coverage, exclusions and limitations will vary. You need to ensure that you have sufficient coverage in the event of total loss of your equipment, automobile, building or contents.