Home What is Comprehensive Insurance and How Does It Works?

What is Comprehensive Insurance and How Does It Works?

by Nikola Djurkovic
Comprehensive Insurance Cover Image

Are you looking for the car insurance package that provides better protection than the bare minimum? Then comprehensive insurance is something that you may want to consider adding to your insurance plan. In a nutshell, it’ll help cover events that are not specifically related to a car accident but could still be expensive to repair. Check out the rest of this guide to understand precisely what it covers, how it compares to collision, and which companies offer it at the lowest price.

What Is Comprehensive Insurance?

This type of insurance is an optional protection plan that you can add to your policy for an extra charge. It covers the damage to your car that did not result from a collision with another vehicle. The common causes are fire, theft, or a falling tree. It’s not mandatory by law, but a car lender may request it. It repays up to the actual cash value (ACV) of your car. The ACV is what your car is worth in the used car market at the moment the damaged occurred. It may or may not have a deductible.

How Does Comprehensive Coverage Work?

It pays the actual cash value of the damage sustained up to your limits, minus any deductible. Your limit is the maximum amount an insurance company will compensate for any given accident, and your deductible is an amount you’ll be paying out of your pocket. In most situations, the actual cash value of your car will be the limit an insurance company would use.

For instance, let’s imagine your 2016 Ford Explorer Sport SUV, with a comprehensive limit of $20,000 and a $500 deductible, was stolen. According to Kelly’s Blue Book, the value of that car is between $25,249 and $27,422. Since this amount exceeds the limit, the insurance company will pay up to the limit, minus the deductible, equaling $19,500.

Comprehensive insurance, by definition, extends beyond your vehicle. It includes newly bought cars, temporary substitute vehicles, cars you are using but don’t own, etc. In other words, insurance follows the driver, not the car. Nonetheless, let your insurance company know if you plan on using a new vehicle regularly.

What Does Comprehensive Insurance Cover?

It covers any damage to your car that didn’t happen in a crash with another vehicle. It commonly includes natural disasters, falling objects like trees or rocks, civil disturbance and vandalism, fire, and theft. Furthermore, if you collide with an animal while driving, your insurance company repays that damage if you have a comprehensive plan. Exactly what’s covered varies depending on the insurer, but you can expect all major companies to include the damage causes we listed here.

When Do You Need Comprehensive Car Insurance?

We would advise anybody with a newer vehicle who can purchase this type of coverage to do so. The repairs or replacement can be quite expensive—the average price of a new car in 2019 is higher than $34,000. Furthermore, the majority of lenders will request that you purchase both collision coverage and comprehensive coverage as a part of the deal.

Drivers of older vehicles should ask themselves if the value of their car sufficient to justify additional coverages. One good way to check that, suggested by the Insurance Information Institute, is to take the extra premium you’re paying for any additional coverages and multiply that number by ten. If the total is higher than the value of your car, it may be more cost efficient to drop some coverage.

Nonetheless, collision coverage is the one that can raise the premium substantially. Comprehensive is comparably cheap, and it may be worth keeping, even for older vehicles.

What Comprehensive Doesn’t Cover

If you find yourself submitting a comprehensive claim, it’s worth knowing what’s not covered. Collision damages, caused either by hitting another vehicle or an inanimate object, like fences or trees, are not included. However, if your car is hit by a falling branch or a running animal, that is covered. Your medical expenses will not be paid under this coverage. Furthermore, any costs related to damage to a third party will not be covered. This includes inflicted property damage, bodily injuries, and legal fees.

What Is the Average Cost of Comprehensive Car Insurance?

We researched the market by getting quotes from four different companies in three different cities for three different types of driver. We requested liability only and liability plus comprehensive protection quotes. Our finding was that adding a comprehensive plan increases premiums by around $30 monthly. See the tables below for more details.

Prices of Liability Only Quotes compared to the Comprehensive Insurance Quotes

The Cheapest Companies Offering Comprehensive Insurance

If you’re working on a tight budget but still want full coverage, we have good news for you. There’s a significant number or well-regarded insurance companies that offer an affordable comprehensive plan. Overall, we found no link between the prices and the quality of the insurer. Below are the monthly premiums for full coverage from the most affordable companies in the US.

Monthly Premiums of The Cheapest Companies that offer Comprehensive Car Insurance

How to Shop for Comprehensive Coverage

As with all insurance coverages, the prices and the quality vary significantly based on the company. That’s why you can save up to a couple thousand dollars and get high-quality insurance with a little bit of research. The best place to start is by reading our auto insurance reviews. You can find how all major US insurance companies perform in the customer service and financial strength departments, as well as which discounts and optional coverages they offer.

Once you check that out, make a shortlist of the companies that best suit your profile. Include anywhere from 5 to 10 companies that offer comprehensive insurance coverage. Then request a quote from all of them with the limits of your choice. This takes just a couple of hours, and you’ll see a significant variance in terms of price.

Even if you’re happy with your current coverage, it’s worth shopping around if your home state allows price optimization (the practice of adjusting a premium based on data that isn’t related to the risk a driver presents). It unfairly discriminates against some people, and it enables charging different groups different prices for the same product. If you show a willingness to leave for a better deal, your insurer will offer you their best prices to stay competitive.

The Benefits of Having Comprehensive Protection

Primarily, the benefits of having comprehensive are reflected in the protection it brings. Some coverages, like car theft insurance or flood coverage, will be more useful in certain states. For example, Alaska, New Mexico, and Nevada lead the nation in car theft according to 2017’s statistic. Furthermore, if you live in a state where natural disasters happen often, like Florida, Oklahoma, or Texas, getting comprehensive is a smart choice.

However, insurance companies base their prices on data that predicts the likelihood of a loss. This means they will charge more for comprehensive automobile coverage in such locations.

Conclusion

In most instances, comprehensive is a worthwhile addition to your policy. It protects you from theft, natural disaster, crashes with animals, and similar hazards. If your vehicle isn’t brand new, the cost of repairing or replacing it may be low enough to justify dropping this coverage. Furthermore, in states where the theft rate is low and natural disasters are uncommon, you may consider driving without comprehensive insurance.

Nonetheless, given that this protection plan is not as expensive as collision, we would advise the majority of drivers to add it to their policy. It is far better to get full coverage from an affordable insurer than to choose limited protection from a more expensive one.

Frequently Asked Questions

What is the difference between comprehensive and collision insurance?

A comparison between comprehensive vs collision insurance shows these are two different types of coverage designed to complement each other. Collision coverage protects you against the damage to your car in a crash, while comprehensive pays for non-collision losses. Both of these coverages include only the insured’s vehicle up to its actual cash value and nothing else. This means that no medical expenses or third-party cars are covered. A lender will often require both comprehensive and collision coverage in the lease agreement.

How do I know if I have comprehensive insurance?

If you bought your car using a loan, it was probably required in the agreement. You can check the contract or reach the lender for more details.

If you purchased your car insurance separately, you’d have had to add comprehensive coverage, since it’s not mandatory. If you aren’t sure, check your policy and feel free to contact your agent.

Why is it important to have comprehensive car insurance?

To have full coverage, it’s essential to protect your vehicle from theft, natural disasters, falling objects, and animals on the road, all of which this coverage provides. It’s particularly important to buy comprehensive coverage if you recently purchased a new vehicle. The price of a new car is higher than ever, and repairing or replacing it without insurance is a substantial expense.

What’s the deductible for comprehensive auto insurance?

This is the amount you’ll pay out of your pocket for each covered claim, and it varies based on your plan. Note that the lower the deductible is, the higher the premium will be. If the damage is $4,000, and your deductible is $1,000, the insurance company will pay you $3,000. You can choose to lower the deductible or to not have it at all on your comprehensive coverage.

Does comprehensive insurance cover rental cars?

Yes. If you already have comprehensive on your policy, your rental car will be covered. However, if you don’t have it, or if your limits are insufficient, you can buy a Loss Damage Waiver from a rental company. It replaces comprehensive. Check our guide on rental car insurance for more details.

Does comprehensive cover theft?

Yes, it does. This protection plan repays you if your car is stolen. The exact details vary depending on the insurer, but all major insurance companies cover theft under comprehensive insurance.

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