Comprehensive insurance is a type of car insurance coverage that pays for damage to a vehicle caused by events other than an accident. For example, comprehensive insurance will cover non-collision related incidents like falling objects, fire, theft, flood, vandalism, wind, and more. Comprehensive insurance is not required by any state laws, but a driver will usually have to buy it for a leased or financed vehicle.
Insurers typically offer comprehensive coverage in conjunction with collision insurance, but comprehensive insurance can generally be bought on its own, too. When combined with liability and collision insurance, comprehensive coverage is a part of full coverage insurance.
What Does Comprehensive Insurance Cover?
- Damage from falling objects
- Flood damage
- Fire damage
- Animal damage
- Damage from natural disasters
- Glass damage, such as a cracked windshield
What Does Comprehensive Insurance Not Cover?
- Damage from a collision with another car or an object, such as a fence or streetlight
- Damage caused by the surface of the road, such as a pothole
- Towing to a mechanic after a breakdown, flat tire, or dead battery
- Use of a rental car if your personal vehicle is inoperable after an accident
Do I Need Comprehensive 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 Kelly Blue Book, Black Book or N.A.D.A. online guides for accurate estimates. Then 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 does contain 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 absolutely destroyed, then you will need to replace it. You need to analyze the risk in terms of how much stress and financial disruption is the worst case scenario going to cause you. By financial disruption we refer 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 strikes and other wildlife-related accidents are common; high-crime areas where car theft, 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.
To better understand the above decision process, let’s imagine a 36-year-old single male who lives in Oakley, California, 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 should answer the three questions discussed above.
Using the quote generator, he will see that comprehensive car insurance will cost about $120-180 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 and he might have to replace his car in case of a theft or vandalism. Entire car replacement means wiping out more than 1/3rd of his emergency funds. In this situation, it is a good idea to buy comprehensive coverage.
How Much Is Comprehensive Insurance?
Comprehensive insurance coverage costs an average of $162 per year, making it far cheaper than other types of car insurance. The cost of a comprehensive car insurance policy is calculated based on the actual cash value (ACV) of the vehicle – its replacement cost minus depreciation. Since the ACV is the maximum amount that a comprehensive insurance policy will pay out, cars that are worth less are cheaper to insure.
The price of comprehensive coverage also varies based on the deductible amount, which typically ranges from $100 to $1,000 for comprehensive insurance. A deductible is the amount of money you will pay out of pocket for car repairs. When you file a collision claim, your insurance provider will cover expenses in excess of that deductible, up to the policy’s limits.
Comprehensive Insurance Cost by Deductible
|Annual Comprehensive Premium||$300||$185|
|Cost Difference||N/A||38% lower than $100 deductible|
Note: Premium figures assume collision coverage with a $1,000 deductible, bodily injury liability limits of $50,000 per injured person and $100,000 per accident, and 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 his monthly premiums will be lower. If he 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.