What You Need To Know About Physical Damage

Hey guys, I am Hunter with Nelson Insurance. I'm gonna go over physical damage insurance because it is a little bit more than just comprehensive and collision coverage, more than just what's my vehicle valued at, here's what I'm gonna get paid out, because that's not actually how it works. I'm gonna go through physical damage, the main things you guys need to know, how insurance will actually pay out for it, because, uh, if you guys think that insurance will just pay out whatever you have listed on your policy that is incorrect. So I just want to let you know how that goes. So we are based in Sioux Falls, South Dakota. Pretty much all I do is trucking insurance. So let's get into it. All right, so the first thing with physical damage is why do you guys put a value on your policy? What does it actually mean? Are you gonna get paid out that amount? The answer is no. So the way that insurance works with trucking insurance on physical damage is Well, just for one, in all trucking insur— and just all insurance in general, there are valuation types. Replacement cost is going to buy you something brand new. Actual cash value is going to buy a market value. It's going to buy you the exact same thing as what you get now, same mileage, same everything, all those lines, no matter pretty much what it is. You got agreed value, which is, hey, whatever we grant for the number, you're going to get a check for pretty much that exact amount. That's kind of how it goes. Trucking insurance for physical damage is called stated value. Stated value is I'm going to list out a number, and it's kind of, it's kind of, uh, not ideal to say the least, for lack of better words. So it's what it is. You are going to get the lesser of what that number is that you have it insured for, or the market value. So if you insure your truck for $50,000 and it's worth $40,000, you're going to get $40,000. If you insure for $50,000 and it's worth $60,000, you're going to get $50,000. You're going to get the lesser of the two. So pretty much you want to make sure every year your values are about as accurate as possible on you guys' insurance, because you're going to pay based off the state value you insure on the truck. So if you guys wanted to save money, yes, you can insure for less. Just expect now that you're going to get lesser amount in the payout if your truck is worth more than what you insure for. So that is good to keep in mind. And then I'll get into the other aspects of it too here. Physical damage is made up of comprehensive and collision coverage. So what does that mean? Collision is a collision, it's an accident. It's going to cover accidents, right? You have comprehensive. The easiest way to think of comprehensive is the other term for it is other than collision. It'll cover insurable events other than collision— hitting a deer, fire, theft, wind, hail, any of that type of stuff, right? Uh, insurance obviously is never going to be covering anything worth maintenance. Insurance is a sudden event. If your tires go out because they've been getting low and getting bald for the last 6 months, it ain't, it ain't gonna cover that. It's not a sudden event, right? So insurance will obviously never cover, um, anything on those lines. You can do what's called specified peril or fire and theft. That apparel is just an event on insurance. Specified peril means like, I'm only going to cover these couple things. Fire theft, your truck's sitting, you might be able to throw fire theft on it, uh, instead of comprehensive and collision. So that way it's covered if it blows up. Catches on fire, just sitting there, um, or something around it catches on fire. And then if, you know, it gets stolen. So obviously we'll not cover hail or anything like that because it's not listed as a peril, as an event, but having coverage there can definitely be helpful, um, to try to save us some money. If the truck's sitting at a garage or a shop or something like that while it's not being driven, you guys will still have to carry auto liability because that's where filings come from to keep your authority active. And even if you have multiple trucks, You have to have auto liability on all trucks owned or operated. So unfortunately you gotta pay that unless you have pay-per-mile insurance. So there's the, uh, the first thing to know. Couple other things to know on physical damage that is very, very important is gap insurance. Gap insurance is gonna come into play. Uh, you can get it on through your loan sometimes, but gap is gonna cover the gap between what you own the truck— excuse me— and what it's valued at. So if you guys owe $50,000 on the truck, and it's worth $30,000, you have a $20,000 gap there. That is where gap insurance can come into play. We literally just had a claim last week where the guy had a $35,000 loan, he got $16,000 because that's what his truck was worth, and, uh, gap insurance covered the rest. So if you guys do not want to gap and cover the difference between that, I recommend getting gap insurance. It's very important. Some insurance companies do not offer gap insurance. Uh, obviously this will not be needed if you do not have a loan in your truck, it's all paid off.. But I would highly, highly recommend GAP because it's incredibly cheap. It's a little endorsement on your policy. Some insurance companies just include it automatically, like Canal, 10-4, etc. And so I'd highly recommend getting GAP insurance. The other thing to note is trucks, when they are insured, or trailers, anything along those lines, are going to be based off the VIN for the value. So you go buy the stock Kenworth T900, you're gonna get paid for the stock base model of that truck. Now, if you guys go add wet lines to it, custom bumpers, uh, sick tires, you deck out the inside, all this permanently attached equipment, insurance does not automatically cover that stuff. You guys will need, um, coverage for permanently attached equipment. Usually some insurance companies out like Progressive are just going to have a blanket coverage of up to $2,000. But I talked to a lot of guys who got $5,000, $10,000 in wet lines on the trucks and custom bumpers and stuff like that. And nobody's ever asked them if they actually need coverage for that stuff. Permanently attached equipment, modifications to the truck, not automatically covered. You guys will need to have something like that there. Um, so it could be called custom equipment, anything along those lines. That is something you guys need to know for physical damage insurance. Uh, how you guys kind of determine deductibles. Obviously you guys have deductibles there. Um, one big thing is there's a difference between deductibles depending on the insurance company. Some have what's called a combined deductible and some just have a normal deductible or a per unit deductible. And so if you guys have a truck, a trailer, and you're hauling cargo, which most of you guys are, excuse me, you guys could have $2,500 deductibles and pay out deductible for the truck, the trailer, and the cargo. It was a total loss between all three. And now you have a $7,500 deductible. That is something to keep in mind because if you got $5,000 or $2,500 deductibles, might be a lot more than you guys are expecting than just the $2,500 out of pocket. Some insurance companies have what's called a combined deductible. And so if you got 3 of those units or lines of business or whatever you want to call them, they all have a claim, it might be $2,500 for the whole claim, might be $1,000, whatever the heck you got your deductible at. Having a combined deductible, um, could save you guys quite a bit of money there. Now you're not normally going to have a deductible on your auto liability unless you guys are fleet or really looking at like SIRs or something on those lines, but that is definitely something to consider. So there's not really much more to it, but I think that a lot of insurance agents don't do a good enough job of explaining this to you guys. Uh, your trucks are very valuable. Brand new trucks, maybe $250,000, $200 grand. I've even heard of some going up to $300 grand. Obviously it'd be something very very, very nice there, but it's a lot of money on the line. And to just go out there and insure for 3, or to, we'll call it $200,000, and you think it's all sitting pretty when you got all this custom equipment and additions to it, and you get paid $50,000 less than what you're expecting, uh, it's a big deal. It's a lot of money. So I wanted to educate you guys on that, give you an idea so you're prepared to make sure your business is protected. So if you guys do have any questions on this stuff, please reach out. Again, I'm Hunter Nelson Nelson Insurance Agency. All We Do Is Trucking. Appreciate you guys watching. Please like, subscribe so I keep making videos like this. And, uh, once again, reach out if you have any questions. Thanks.