Here’s the Deal
Auto liability covers the other guy. Physical damage covers YOUR truck. If your rig gets wrecked in an accident, stolen, damaged by hail, or caught in a fire, physical damage insurance is what pays to repair or replace it.
Here is the catch: the federal government does not require physical damage insurance. The FMCSA does not care if your truck is protected. But your lender absolutely does. If you have a loan or lease on your truck, your lender will require physical damage coverage for the life of that loan. Try to drop it and they will force-place coverage at a much higher rate.
Even if you own your truck outright, ask yourself this: if your truck was totaled tomorrow, could you write a check for a replacement and keep your business running? If the answer is no, you need physical damage insurance.
The Three Types of Physical Damage Coverage
Physical damage is not one policy — it is typically a combination of coverages:
Collision covers damage to your truck from hitting something or being hit. Jackknifing into a guardrail, rear-ending a car in traffic, rolling your truck on a curve. If your truck collides with an object or another vehicle, collision pays for repairs or replacement.
Comprehensive covers everything else that is not a collision. Theft, fire, vandalism, hail, wind, flooding, hitting a deer. If something happens to your truck that was not a driving collision, comprehensive handles it.
Specified perils is a cheaper alternative to comprehensive that only covers specific named risks — typically fire, lightning, windstorm, hail, flood, theft, and vandalism. If something happens that is not on the list, you are out of luck. Some carriers choose this to save on premiums, but you are gambling that nothing unexpected happens.
The Deductible Math You Need to Do
Your deductible is what you pay out of pocket before insurance kicks in. Common deductible levels for trucking physical damage are $1,000, $2,500, and $5,000.
Here is the math that matters. Say your premium with a $1,000 deductible is $4,800 per year. With a $2,500 deductible, it drops to $3,900 per year. That is $900 in annual savings.
If you go a full year without a claim, you saved $900. After two clean years, you saved $1,800. But if you have a claim in year one, you pay $1,500 more out of pocket ($2,500 minus $1,000). You still come out ahead after two clean years.
With a $5,000 deductible, your premium might drop to $3,200 per year — saving $1,600 annually. But if you have a claim, you are paying $4,000 more out of pocket than you would with the $1,000 deductible. That takes nearly three clean years to break even.
The decision depends on your cash reserves and your risk tolerance. If a $5,000 surprise bill would hurt your business, keep the lower deductible. If you have cash in the bank and a clean driving record, the higher deductible can save real money over time.
Agreed Value vs Actual Cash Value — This Is Critical
This is the single most important decision in your physical damage policy, and it is where truckers get burned the most.
Actual Cash Value (ACV) means your insurer pays what your truck is worth at the time of loss, minus depreciation. You bought your truck for $150,000 three years ago. It has 400,000 miles on it. According to the insurance company’s depreciation schedule, it is now worth $85,000. If it gets totaled, you get $85,000 — minus your deductible. If you still owe $110,000 on your loan, you are $25,000 underwater.
Agreed Value means you and your insurer agree upfront on what the truck is worth. You say $120,000, they agree, and that is what they pay if it is totaled. No depreciation argument. No lowball adjuster offer. The number is set when you buy the policy.
Agreed value costs more in premium. It is worth every penny. The difference in premium might be $30-50 per month. The difference in payout on a total loss can be $30,000 or more. There is no contest.
If your truck is financed, agreed value is even more important because it helps prevent the gap between what insurance pays and what you owe on the loan.
Gap Coverage for Financed Trucks
Even with agreed value, there can be a gap between your insurance payout and your loan balance — especially in the first year or two when depreciation is steepest and your loan balance is highest.
Gap coverage (also called loan/lease gap) pays the difference. If you financed with a small down payment or a long loan term, gap coverage is essential. The cost is minimal compared to owing $20,000 on a truck that no longer exists.
Whether you carry ACV or agreed value, review your policy annually. Make sure the valuation reflects your truck’s real-world condition and the current used truck market. Update agreed value amounts at each renewal so you are not overpaying premium on depreciated equipment.
What Physical Damage Does Not Cover
- Mechanical breakdown. Your engine blows, your transmission fails, your turbo gives out — that is maintenance, not insurance. Some insurers offer mechanical breakdown coverage as a separate add-on, but it is not part of standard physical damage.
- Normal wear and tear. Tires wearing out, brakes needing replacement, paint fading. Insurance covers sudden and accidental damage, not gradual deterioration.
- Intentional damage. If you damage your own truck on purpose, your claim will be denied and you may face fraud charges.
- Items not scheduled on the policy. Aftermarket additions (custom exhaust, chrome packages, sleeper upgrades) may not be covered unless you specifically list them and their value on the policy.
Winter States and Physical Damage
If you run through Colorado, Wyoming, Montana, or Idaho in winter, pay attention to your physical damage coverage.
Chain damage is one of the most common PD claims in mountain states. Chains come loose, wrap around axles, tear up fenders and brake lines.
Wyoming’s I-80 corridor is notorious for wind events that blow trucks over regularly between Rawlins and Rock Springs. Make sure wind damage is covered under your comprehensive.
Hail in Texas (especially the panhandle in spring) and hurricane exposure in Florida are regional risks that spike PD claims. Review your comprehensive coverage before these seasons.
The Bottom Line
Physical damage insurance protects the asset that makes your business possible. If you have a loan, you have no choice — your lender requires it. If you own your truck free and clear, it is still the smart move unless you can truly afford to replace your rig out of pocket.
Choose agreed value over actual cash value. Do the deductible math based on your cash reserves. Add gap coverage if you are financed. And review your policy annually to make sure coverage keeps pace with your truck’s real-world value.
Your truck is your livelihood. Protect it like one.