Despite its name, comprehensive coverage does not protect drivers against all forms of damage to their vehicles. It covers only damage from theft, vandalism, falling objects, flood, fire, animals, or natural disasters. It also covers claims in which the damage is limited to glass damage such as a cracked windshield.
Insurance providers usually offer comprehensive and collision coverage together. Both are optional under state law, but when comparing comprehensive vs. collision coverage, you should realize that they offer protection against different sorts of damage. Drivers usually will have to buy only comprehensive coverage to satisfy the requirements of their auto loan provider or leaseholder. Otherwise, drivers will have to weigh the risks of purchasing or dropping comprehensive insurance. We’ll walk you through that decision process and discuss the finer points of comprehensive auto insurance below.
But first, the short video below will help you understand the similarities and differences between comprehensive and collision insurance.
What is NOT covered under comprehensive coverage?
- Collision with another car or an object such as a fence or streetlight; or damage caused by the surface of the road such as a pothole;
- “Collision insurance” covers such damage.
- Towing to a mechanic in case of breakdown, flat tire, or dead battery;
- “Roadside assistance and towing coverage” covers such services.
- Paying for a rental car if your personal vehicle is inoperable after an accident.
- “Rental reimbursement coverage” compensates for this expense.
Do I need comprehensive car insurance?
For the most part, comprehensive insurance is optional. No state requires drivers to carry it. However, if you have a loan or lease, many auto lenders and leaseholders will require drivers to purchase comprehensive insurance coverage.
If your auto financing is paid off, first determine the value of your vehicle. Use common sources like the Kelley Blue Book, Black Book or N.A.D.A. online guides for accurate estimates. Next, consider the following scenarios when deciding whether to purchase comprehensive auto insurance:
Scenario 1: You cannot afford to repair or replace your car.
Quick Answer: Buy comprehensive coverage.
Imagine a severe thunderstorm rolls through your hometown, uprooting a massive oak tree. Unexpectedly, it falls onto your car, crushing it. Could you afford to buy a new car? If not, you should probably buy comprehensive car insurance. It is a relatively inexpensive way to protect your car and finances.
Scenario 2: You can afford to replace your car.
Quick Answer: It depends.
If your “rainy day” fund contains enough money to replace your car, you can drop your comprehensive coverage and self-insure if you want to. But before deciding, ask yourself three questions:
1. How much will I save by not buying insurance?
Using the WalletHub Car Insurance Quote Generator, you can calculate your average price of comprehensive car insurance. The price will largely be determined by how much your car is worth and the deductible you select. Unless you have a terrible driving record, you will probably save a couple hundred dollars per year by not purchasing comprehensive coverage.
2. How much money is at risk?
The highest amount at risk would be in the worst case — i.e. if your car is totaled, then you will need to replace it. You need to analyze the risk in terms of how much stress and financial disruption the worst-case scenario is going to cause you. By “financial disruption,” we are referring to “calculating” what portion of your retirement fund, emergency fund, or college savings would get wiped out.
3. What are the odds I will have to pay to repair or replace my car?
To answer that question, you should determine if you drive through hazardous areas. If so, the likelihood of damage to your car is greater.
Hazardous areas include rural areas where deer strike and other wildlife-related accidents are common; high-crime areas where car thefts, break-ins, and vandalism are common; areas prone to natural disasters such as wildfires, floods, mudslides, tornadoes, hurricanes, or earthquakes; or busy highways where gravel and other detritus can damage your windshield.
Depending on your neighborhood, you might have to worry about some or all of these dangers. Ask yourself if you are comfortable paying a couple hundred dollars per year to compensate for such risks.
Comprehensive Insurance Example
To better understand the above decision process, let’s imagine a 36-year-old single male who lives in Oakley, Calif., where the crime rate is considerably high. Let’s call him Mark. He owns a 2008 Honda Accord LX Sedan that contains only the standard package, and it’s in good condition, with 100,000 miles. According to the Kelley Blue Book, Mark’s Accord is worth approximately $7,500.
If Mark has an emergency fund of only $2,000, he should buy comprehensive coverage. However, if he has $20,000 in his fund, he first should answer the three questions discussed above before deciding.
Using the quote generator, he will see that comprehensive car insurance will cost about $120 to $180 per year. In other words, he would save approximately 2% of the value of his car by not purchasing comprehensive coverage.
Moreover, considering the fact that Mark’s neighborhood is not very safe, he might have to replace his car in case of theft or vandalism. Entire car replacement means wiping out more than a third of his emergency funds. In this situation, it is a good idea to buy comprehensive coverage.
How much does it cost? And what should the deductible be?
Every state requires drivers to carry tens of thousands of dollars of bodily injury and property damage liability coverage. These policies make up the bulk of a driver’s monthly car insurance bill. The drivers’ age, location, profession, and other factors will also affect the price of these policies to some degree.
In addition to the above factors, the value of a comprehensive car coverage policy is calculated based on the actual cash value (ACV) of the vehicle — the purchase price minus depreciation and the deductible. Because the typical car’s ACV is not worth several tens of thousands of dollars, comprehensive coverage tends to be far more inexpensive than other auto insurance coverage components.
The price of comprehensive coverage will also vary according to the size of the deductible, which typically ranges from $100 to $1,000. A deductible is the amount of money you will pay out of pocket for car repairs. Your insurance provider will cover the ACV, or the expenses in excess of that deductible, up to the policy’s limit.
The WalletHub's Car Insurance Quote Calculator tells us how much an average driver would pay as well as the maximum amount the insurance company would pay out if his or her car needed to be replaced.
|Vehicle Value||Deductible||Max. Payout (Value – Deductible)||Comprehensive Premium (Monthly Avg.)||Total Premium* (Avg.)||% (Comprehensive of Total Premium)|
* Premium figures assume collision coverage with $1,000 deductible, bodily injury liability policy with a limit of $50,000 per injured person and a maximum payout of $100,000 per accident, as well as a property damage liability limit of $50,000.
As this chart clarifies, the larger the deductible, the more that driver will pay out of pocket. But the monthly premiums will be lower. If he or she chooses the smaller deductible, the opposite would be true. This tradeoff is true for every driver to some extent, even drivers of different ages, marital status, and driving history.
For most drivers, comprehensive coverage is relatively inexpensive considering the broad coverage the policy offers. However, unless you are financing the purchase or lease of a new car, it is not mandatory. Accordingly, you should compare comprehensive car insurance quotes to pick the right balance of costs and benefits that satisfies your budget and your appetite for risk.