What Is Comprehensive Insurance and What Does It Cover?

What Is Comprehensive Insurance?

Comprehensive insurance is a type of automobile insurance that covers damage to your car from causes other than a collision. Comprehensive insurance will cover your vehicle if destroyed by a tornado, dented by a run-in with a deer, spray-painted by a vandal, damaged by a break-in, crushed by a collapsing garage, or many other causes.

Understanding Comprehensive Insurance

Comprehensive insurance, collision insurance, and liability insurance are the three components of an automobile insurance policy. In most states, the law requires drivers to carry a stated amount of liability insurance, but collision and comprehensive insurance are optional if someone owns a vehicle outright. If a person has financed the vehicle, the auto loan company might require comprehensive insurance, plus perhaps uninsured motorist or gap insurance.

What Comprehensive Insurance Covers

In terms of what comprehensive insurance covers, the list includes damages related to:

• Contact with animals, such as hitting a deer
• Natural disasters, including earthquakes, floods, and hurricanes
• Fire
• Riots and vandalism
• Vehicle theft, or theft of certain parts of the vehicle
• Broken windshields
• Fallen objects, including branches, rocks, or hail

Comprehensive Insurance vs. Collision Insurance

It can make sense to have comprehensive car insurance if you're buying a brand-new car, regardless of whether you finance it or pay cash. Comprehensive coverage can protect you against minor and major damages caused by things beyond your control, regardless of whatever coverage you may have that extends to accidents. Collision coverage costs an average of $290 a year.

Where you live can also play a part in your decision of when to have comprehensive coverage. If you live in a rural area where collisions with animals are common or in a stormy area that often gets hail, you might want to purchase comprehensive insurance. The same is true if you live in a higher-crime part of town where break-ins and theft occur regularly.

Collision insurance protects you in a single-car rollover, a collision with another vehicle, or a collision with an object. It does not cover break-ins, thefts, or weather-related damage. If you lease a car, you'll be required to purchase collision insurance. Collision insurance comes in handy when you get into an accident to help pay for your vehicle's repair, and it covers any damage to your car due to potholes in the road.

Sometimes comprehensive insurance is referred to as "other than collision." Neither insurance will cover medical bills from an accident or damage to another person's vehicle if you are in an accident.

Cost of Comprehensive Insurance

Comprehensive covers damage to your car caused by accidents and disasters beyond car accidents. The average cost of comprehensive averages approximately $134 per year but can rise to nearly double that, depending on such factors as the state where you live..

Collision and comprehensive insurance each have their own deductibles, so a driver can choose different deductibles based on perceived risk levels in each of these areas. (Liability insurance has no deductible.)

If someone thinks they’re not likely to file a comprehensive claim, but they don’t want to forego comprehensive insurance altogether, they could choose a relatively high $1,000 deductible to lower the premiums. The higher a vehicle’s cash value, the more expensive a comprehensive insurance policy will be.

Understanding how insurance companies determine driver risk classes can help you estimate what you might pay for comprehensive coverage. Where you live, your driving record, and your coverage amounts can determine how much you pay for car insurance, including comprehensive coverage.

Advantages and Disadvantages of Comprehensive Insurance

Comprehensive auto insurance protects you financially from theft, natural accidents, and weather-related damage. This means you won't end up paying out of pocket if a tree falls on your car or a thief steals your catalytic converter.

There are downsides. If you are in an accident, comprehensive insurance won't pay for the damage: collision coverage does. Comprehensive insurance may also be expensive if you are purchasing it along with collision insurance. If your vehicle is older and paid off, you could save money by not purchasing comprehensive coverage, especially if theft and weather-related events are not concerns where you live.

Example of Comprehensive Insurance

Comprehensive insurance works similarly to other types of auto insurance if you need to file a claim. If you've never had to do so, here’s an example showing how comprehensive insurance works if a driver files a claim for vehicle damages.

Say someone owns and drives a Honda Accord worth $10,000, with a $1,000 comprehensive deductible. If a tornado destroys the car, the driver will receive $9,000 from the insurance company. If they don’t have comprehensive coverage and a tornado destroys the vehicle, the collision and liability portions of the policy won’t cover the damage.

The owner will be responsible for the entire $10,000 loss. The driver might have to get a loan to purchase a replacement vehicle or settle for something less expensive if they don’t have $10,000 to spend on an equivalent replacement.

This example of comprehensive insurance in action may offer some perspective on how valuable it can be . If you're leaning more toward the "when to drop comprehensive insurance" side, it's helpful to know how much damages may cost you to repair out of pocket.

The Bottom Line

You might decide to skip comprehensive insurance if you've paid for your vehicle in full, you can’t afford the coverage, you own an older automobile that a low value, or you prefer to self-insure.

However, remember that forgoing comprehensive coverage means you could end up with a steep repair bill if your car is damaged. So weigh the costs of any potential repairs against what you might pay in premiums or deductibles to maintain comprehensive coverage.