The Truth About Physical Damage Direct Auto Insurance

The Value Of Physical Damage Direct Auto Insurance

The book price or value refers to the amount stated as the going price for used cars. These amounts are given in national used-car reports published for auto dealers, direct auto insurance companies, lending agencies, etc.
Some allowance must be made for cars in especially good or bad condition. But the book value is seldom very far out of line.

Stated amount limit.
Certain types of vehicles usually are not covered under the “actual cash value” form of insurance. Taxi- cabs, buses, police cars, snow plows and the like are covered by a “stated amount” limit.

A physical damage policy on a bus would state the maximum amount the insurance company would have to pay in the event of a total loss. In no case will the company pay more than the actual value of the bus.
There would be little reason for you to request the “stated amount” limit. The amount stated might be $2,000 and you would pay a premium based on this amount. Yet, should your car be destroyed, you could only collect up to its actual cash value—which might be considerably less than $2,000.

The only advantage to the stated amount limit is that you can insure a vehicle for less than its actual value. Thus, if you have a taxicab worth $5,000, you might consider insuring it up to $3,000 in order to reduce the cost of the insurance. Income-tax feature.

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When your car is damaged by fire or collision or other casualty, and you don’t collect from direct auto insurance company, you are permitted to make an income-tax deduction for your loss. If you are in a high tax bracket, such a deduction would materially cut down your actual loss. The amount of the deduction which you would get for damage to your automobile would come out of the “top” tax dollar. Your tax bracket—high or low—is a factor to take into account when you consider buying physical damage insurance.

Tax rates vary from year to year. The practical effect of the income-tax deduction is that the United States government pays part of your loss if your income is substantial. If your top tax bracket is 50 per cent, in effect, the government would pay half of your auto damage loss; if you are in a 25 per cent bracket, the government would pay 25 per cent of your loss

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