Why Some People Are Going Without Physical Damage Coverage

Auto insurance is necessary to protect vehicle owners from financial losses associated with automobile accidents. Most states have auto insurance requirements for vehicle owners that can cause them to incur penalties if they don’t comply. The minimum requirements vary by state, but typically only auto liability coverage is actually required. In many states, physical damage is optional, and many drivers neglect to add it to their insurance profile. Below are some of the reasons that drivers may choose to go without physical damage coverage.

1. They have an older and/or completely paid off vehicle.

Physical damage coverage can pay to repair or replace the policyholder’s vehicle if it is damaged or destroyed in an accident. However, if the vehicle is paid off, there is no obligation for the owner to have to pay someone else if something happens to the vehicle. On top of that, if it’s an older model and has high mileage, the Actual Cash Value may be only a couple thousand dollars. If either of these are applicable, it may not make sense to the vehicle owner to pay additional premiums for physical damage coverage for a vehicle that is not a big financial risk for them.

2. They have plenty of money for a new vehicle.

Some vehicle owners have financial situations which would allow them to easily replace a vehicle out-of-pocket if the responsibility to do so fell on them. Or, they may have excellent credit and would be able to secure an auto loan easily, so they don’t mind taking the risk of not having physical damage coverage.

3. They drive very safely or infrequently.

In certain areas of the country, people may own cars but not drive very frequently. Or, they may believe that they drive so safely, that the probability of their being in an accident is low. In either of these cases, the vehicle owner may believe that the benefits of physical damage coverage do not outweigh the costs to them.

Auto liability coverage only financially benefits the person or persons who sustained injuries and/or property damage in an accident caused by the insured. Going without physical damage insurance and meeting only the minimum legal requirements for insurance coverage may leave a driver without enough financial protection to cover them after bad accident. No driver is perfect, and accidents just happen. If the loss of a vehicle would put a measurable amount of burden on a client, they may want to reconsider physical damage insurance to give them that safety net.


About American Team Managers Insurance Services

Founded in 1998 by Chris C. Michaels, American Team Managers Insurance Services (ATM) has provided wholesale and MGA services to more than 5,000 independent insurance agents throughout the United States. Our goal is to establish close, long-term relationships with our agency partners and insurance carriers and provide competitive products for the Exclusive and Non-Exclusive markets that we serve. For more information on our products and services, give us a call at (877) 671-7503 to speak to a representative.