All of the following are true regarding physical damage coverage EXCEPT?

The statement regarding the limit of liability is incorrect because the standard for physical damage coverage does not set the limit of liability as the greater of the actual cash value or the amount necessary to repair or replace the vehicle. Instead, the liability is typically determined by the actual cash value at the time of the loss minus any deductible, meaning that if a vehicle is damaged, the payout will reflect its current market value rather than the potential costs for repairing or replacing it.

This distinction is critical in understanding how insurance payouts work. Actual cash value takes into account depreciation, while repair or replacement costs may not consider this depreciation and can often result in a higher figure. Therefore, the insurer does not guarantee to pay the higher amount of repair or replacement cost; rather, they will settle based on the actual cash value, which limits the insured's ability to expect full reimbursement for all costs related to repairs or replacements.

The other statements are consistent with standard policies for physical damage coverage, providing accurate information on how nonowned autos are covered, the rental reimbursement maximums, and the deduction of any applicable deductibles from the amount payable for a loss.