9.4 BAP Physical Damage Coverage

Property & Casualty Insurance Exam

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1 Introduction

0.1 About the Property & Casualty Exam 0.2 How to Use This Course

2 Chapter 1: Insurance Fundamentals

1.1 Risk and Risk Management 1.2 Types of Risk 1.3 Principles of Insurance 1.4 The Insurance Contract 1.5 Policy Structure and Components

3 Chapter 2: Property Insurance Concepts

2.1 Property Coverage Basics 2.2 Perils, Hazards, and Exclusions 2.3 Valuation Methods 2.4 Coinsurance and Insurance to Value 2.5 Deductibles and Policy Limits

4 Chapter 3: Dwelling Policies

3.1 Dwelling Policy Overview 3.2 Dwelling Policy Forms (DP-1, DP-2, DP-3) 3.3 Dwelling Property Coverages 3.4 Dwelling Exclusions and Conditions

5 Chapter 4: Homeowners Policies

4.1 Homeowners Policy Overview 4.2 Homeowners Policy Forms (HO-2 through HO-8) 4.3 Section I: Property Coverages 4.4 Section II: Liability Coverages 4.5 Homeowners Exclusions 4.6 Homeowners Conditions 4.7 Common Homeowners Endorsements

6 Chapter 5: Personal Auto Policy

5.1 Personal Auto Policy Overview 5.2 Part A: Liability Coverage 5.3 Part B: Medical Payments Coverage 5.4 Part C: Uninsured/Underinsured Motorists 5.5 Part D: Physical Damage Coverage 5.6 PAP Exclusions 5.7 No-Fault Insurance and PIP

7 Chapter 6: Liability Insurance Concepts

6.1 Liability Insurance Basics 6.2 Negligence and Tort Law 6.3 Types of Legal Liability 6.4 Personal Umbrella Policies

8 Chapter 7: Commercial Property Insurance

7.1 Commercial Package Policy (CPP) 7.2 Building and Personal Property Coverage Form 7.3 Causes of Loss Forms 7.4 Business Income Coverage 7.5 Businessowners Policy (BOP)

9 Chapter 8: Commercial General Liability

8.1 CGL Policy Overview 8.2 Coverage A: Bodily Injury and Property Damage 8.3 Coverage B: Personal and Advertising Injury 8.4 Coverage C: Medical Payments 8.5 CGL Exclusions 8.6 CGL Limits and Conditions

10 Chapter 9: Commercial Auto Insurance

9.1 Business Auto Policy Overview 9.2 Covered Auto Designation Symbols 9.3 BAP Liability Coverage 9.4 BAP Physical Damage Coverage 9.5 Garage and Truckers Coverage Forms

11 Chapter 10: Workers Compensation

10.1 Workers Compensation Overview 10.2 Part One: Workers Compensation Insurance 10.3 Part Two: Employers Liability 10.4 Workers Compensation Exclusions 10.5 Other States and USL&H Coverage

12 Chapter 11: Other Commercial Lines

11.1 Inland Marine Insurance 11.2 Ocean Marine Insurance 11.3 Commercial Crime Insurance 11.4 Surety Bonds 11.5 National Flood Insurance Program 11.6 Professional Liability Insurance 11.7 Commercial Umbrella and Excess Liability 11.8 Boatowners and Personal Watercraft Insurance 11.9 Farm and Ranch Insurance 11.10 Mobile Home and Manufactured Housing Insurance 11.11 Title Insurance

13 Chapter 12: Insurance Regulations and Ethics

12.1 Producer Licensing 12.2 Producer Authority and Responsibilities 12.3 Unfair Trade Practices 12.4 Claims Settlement Practices 12.5 State Insurance Department 12.6 Penalties and Disciplinary Actions

9.4 BAP Physical Damage Coverage

Key Takeaways Explain This Topic AI

BAP Physical Damage is FIRST-PARTY coverage on the insured's own covered autos and offers three options: comprehensive, collision, and specified causes of loss.

Comprehensive covers all direct loss EXCEPT collision and a few exclusions (it pays theft, fire, hail, flood, vandalism, glass, and animal strikes).

Collision means impact with another object or overturn; hitting an animal is COMPREHENSIVE, not collision.

Specified causes of loss is a named-peril, lower-cost option (fire, lightning, explosion, theft, windstorm/hail, earthquake, flood, mischief, sinking/derailment) that excludes collision and falling-object damage.

Standard transportation-expense (rental) reimbursement is $20/day up to $600 per loss, payable only when a covered auto is stolen; valuation is Actual Cash Value (ACV) unless a Stated Amount endorsement applies.

Last updated: June 2026

First-Party Coverage

Physical Damage (Section III) is first-party coverage — it pays for direct and accidental loss to the insured's own covered auto , regardless of fault. It is written using the physical-damage symbols (usually 7 or 2 ) and each coverage carries a deductible.

The Three Options
Comprehensive (Other Than Collision)

Comprehensive is the broadest physical-damage option. It pays for any direct loss EXCEPT collision and the policy's stated exclusions. Covered causes include theft, fire, explosion, hail, windstorm, flood, falling objects, vandalism, glass breakage, and contact with a bird or animal .

Collision

Collision means the upset (overturn) of a covered auto or its impact with another vehicle or object . Examples: striking a guardrail, rear-ending a car, rolling over. Collision typically carries a higher deductible because losses are frequent.

Specified Causes of Loss

A named-peril option costing less than comprehensive. It covers only: fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief or vandalism, and the sinking, burning, collision, or derailment of a conveyance transporting the auto. It does NOT cover collision of the auto itself, glass-only breakage, or falling/flying objects (those are comprehensive).

Peril Comprehensive Collision Specified Causes
Theft ✓ ✗ ✓
Fire ✓ ✗ ✓
Hail/Windstorm ✓ ✗ ✓
Flood ✓ ✗ ✓
Vandalism ✓ ✗ ✓
Glass breakage ✓ ✗ ✗
Falling object ✓ ✗ ✗
Animal strike (deer) ✓ ✗ ✗
Vehicle overturn/impact ✗ ✓ ✗
Relative premium Medium Highest Lowest

Classic trap: A deer running into the car is comprehensive ; swerving and hitting a tree to avoid the deer is collision .

Additional Coverages

Coverage Limit Trigger

Transportation Expenses $20/day, $600 maximum Only after THEFT of a covered private passenger auto; begins 48 hours after the theft

Glass repair option Deductible may be waived Repair rather than replace
Towing (if endorsed) Scheduled amount Disablement
Valuation and the Limit of Insurance

The insurer pays the lesser of the Actual Cash Value (ACV) of the auto or the cost to repair/replace with like kind and quality, minus the deductible.

Method How It Pays
Actual Cash Value (ACV) Replacement cost minus depreciation (default)
Stated Amount Lesser of stated amount, ACV, or repair cost — caps payout, common on older/specialty rigs
Agreed Value / RC By endorsement on select units
Worked ACV Example

A box truck with a replacement cost of $40,000 has depreciated 45 percent. The deductible is $1,000.

ACV = $40,000 × (1 − 0.45) = $22,000
Less deductible: $22,000 − $1,000 = $21,000 paid
Exclusions

Exclusion Detail
Wear and tear, freezing, mechanical breakdown Maintenance-type losses
Blowouts/road damage to tires Unless other covered loss also occurs
War and nuclear hazard Standard catastrophe exclusions
Electronic equipment not permanently installed Unless scheduled
Diminution in value Loss of resale value after repair
Hired-Auto Physical Damage

For rented vehicles (Symbol 8), the Hired Auto Physical Damage endorsement can pay on a primary or excess basis and may reimburse the rental company's collision damage waiver (CDW) charge — useful for businesses that frequently rent.

How a Total Loss vs. Repairable Loss Is Settled

The insurer chooses, at its option, to either pay for the loss in money or repair/replace the damaged auto. On a repairable loss, the carrier pays the cost to restore the vehicle with like kind and quality less the deductible. On a total loss, it pays ACV (or the stated/agreed amount) less the deductible, and the salvage transfers to the insurer.

Loss Type Settlement
Repairable Cost to repair − deductible
Total loss Lesser of ACV / stated amount / repair cost − deductible; insurer takes salvage
Glass-only May waive deductible if repaired rather than replaced
Deductible Mechanics

The deductible applies per covered auto, per occurrence . If a hailstorm damages five owned trucks, five deductibles apply because each auto is a separate loss. If a single truck suffers both comprehensive and collision damage in one accident, only the larger of the two deductibles is subtracted. Comprehensive deductibles are usually lower than collision deductibles because comprehensive losses (glass, theft) tend to be smaller and the insurer wants the insured to report them.

Worked Multi-Vehicle Example

A tornado damages three scheduled vans, each insured for comprehensive with a $500 deductible. Repair estimates are $4,000, $6,000, and $9,500.

Van 1: $4,000 − $500 = $3,500
Van 2: $6,000 − $500 = $5,500
Van 3: $9,500 − $500 = $9,000

Total paid: $18,000 (three separate deductibles, one per auto).

This is a frequent exam item — students wrongly apply a single deductible to the whole storm. The BAP treats each covered auto as its own loss.

Coverage Extensions and Limitations

Audio/visual and electronic equipment permanently installed is covered; portable or non-installed gear (radar detectors, removable GPS) is excluded unless scheduled.

Custom-furnishing/equipment caps can apply to vans/trucks with added equipment.

Diminution in value (lost resale value after a quality repair) is expressly excluded, a fact tested against the intuition that 'the car is worth less now, so they must pay.'