What Is Comprehensive Insurance and Do I Need It?
If you’re shopping for auto insurance, you might wonder what type of coverage you need. Most car insurance policies include a set of basic coverages that are required by your state and are important for every driver to have. However, certain coverages are optional — one being comprehensive car insurance. Since it’s optional, you might be tempted to skip it and save some money, but don’t be too hasty because comprehensive coverage might be something you need.
So what is comprehensive insurance, how does it differ from collision coverage and how do you know if it’s something you need?
What is comprehensive coverage?
Let’s first define comprehensive coverage. Essentially, comprehensive insurance covers your car from damages caused by events that are out of your control. That includes most situations other than a car accident or a rollover.
Like most types of insurance, comprehensive coverage has a deductible you have to meet before the insurance company will start to contribute. It also has a limit, which is the maximum amount of money that your insurance provider will pay towards a covered claim. Your limit is usually based on the actual cash value of your car.
Comprehensive coverage is optional for all drivers, and no states require it. It’s an add-on coverage that auto insurers provide at an additional cost. However, there are a number of reasons why having comprehensive insurance is beneficial for most drivers.
Is comprehensive insurance full coverage?
People sometimes think “comprehensive car insurance” is synonymous with “full coverage car insurance,” but that is not necessarily true. Comprehensive coverage will pay for damage caused to your car by pretty much everything outside an actual collision. It also avoids any type of liability coverage that’s needed to cover damage to others’ property and injuries to yourself or others. So if you get a chipped windshield or your car is stolen it’s the comprehensive part of your insurance that covers the loss.
Full coverage car insurance is also somewhat misleading as there is no such insurance that is full coverage — in the sense that it covers every single event. Instead, “Full Coverage” in insurance parlance is used to describe some combination of comprehensive, collision and liability insurance. It also encompasses any other type of auto coverage you purchase to cover your car.
Because liability insurance is required in most states, nearly every driver will have some form of liability insurance. Collision and comprehensive coverage is typically optional, and depending on your circumstances, you may choose to add it or to pass it by. Those who lease their vehicles are often required to carry full coverage. Lenders may also require comprehensive or collision insurance. Otherwise, the choice is up to you to decide how much comprehensive and collision insurance you need to feel comfortable.
What does comprehensive insurance cover?
Comprehensive insurance covers your car in almost any situation other than an accident with another vehicle. These are situations that are unexpected and out of your control. The most common events covered by comprehensive coverage include:
- Accidents with animals
- Debris from other cars
- Extreme weather
- Falling objects
- Windshield damage
Comprehensive coverage only pays to repair or replace your vehicle after a covered event. It doesn’t cover injuries or medical expenses for you or your passengers. That’s where your medical payments coverage comes in.
Depending on your policy, comprehensive insurance might also cover damage to rental cars or a car you’re borrowing from a friend or family member, but check your policy to see what is and isn’t covered. Different providers have different exclusions.
If your car is stolen and you have comprehensive insurance, your insurance provider will help you buy a new car. Depending on your policy, you’ll either receive the actual cash value or the replacement cost value of the car. If your policy includes replacement cost value, the insurance company will reimburse you for the cost of a new car that is the same make and model as your original vehicle.
What to consider when getting comprehensive coverage
There are no states that will require you to get comprehensive car insurance, but some lenders and lessors will. When shopping for comprehensive insurance, there are a number of factors you’ll want to consider. We’ve listed some and explained why they’re important below. As always, The Simple Dollar is working to help you make frugal and savvy financial decisions in order to save money.
The book value of your car is one of the top considerations for comprehensive coverage. One common rule of thumb is that when the annual cost of comprehensive coverage is 10% or more of the value of your car, it simply isn’t worth it any longer. So if you have a car worth $5,000 it doesn’t make sense to pay more than $500 annually for comprehensive coverage. Generally, it makes more sense to get comprehensive coverage for cars that are less than 10 years old.
Keep in mind that this rule of thumb is only true if you have the cash reserves to replace your vehicle if it gets totaled in an accident.
Those who do a lot of driving may be better off with comprehensive insurance since they are more likely to have a rock jump up and break a window, or to have an animal run in front of their car and damage it.
If you regularly park in an area that has a greater risk of car theft or vandalism it could be sensible to get comprehensive car insurance.
Finally, those with a history of getting into accidents and reckless driving may also want to consider keeping their comprehensive coverage.
How much does comprehensive insurance cost?
According to data compiled by the Insurance Information Institute in 2017 the average cost of comprehensive car insurance in the U.S. was $159.72. Of course the average varied from state to state — with the least expensive comprehensive coverage in Oregon ($101.80) and the most expensive in South Dakota ($308.71).
When looking at the cost of comprehensive insurance versus liability and collision insurance, we see that comprehensive insurance is the least expensive component if one decides to get full coverage. Collision insurance is roughly twice as expensive ($363.08 on average in the U.S. in 2017) as comprehensive insurance. The liability insurance that’s required in nearly every state is most expensive of all, costing nearly 4x as much ($611.12) as comprehensive insurance.
Given that comprehensive coverage gives you protection from a wide variety of incidents that are often beyond your control the small additional cost can be well worth it. Imagine the expense if your car is stolen, or if someone intentionally scratches the paint. Even a chipped windshield is going to cost $350 on average to replace, which is more than double the annual cost of comprehensive insurance. As you can see, comprehensive car insurance may not be necessary, but it certainly can be worthwhile financially.
Do you need comprehensive coverage?
You don’t legally need to have comprehensive coverage in order to operate your vehicle. It’s an optional coverage that all auto insurance companies offer their customers for added protection. While adding comprehensive coverage to your auto policy will slightly raise the price, there are reasons why all drivers should consider getting it.
If you’re leasing your car or have a loan, your lender may require you to have both comprehensive and collision insurance until you pay off your vehicle. Before purchasing a car insurance policy, check with your lender to see what types of coverage you need to have.
If your vehicle is stolen, it’s usually on the driver to buy themselves a new car. If you’re not financially prepared, that can quickly drain your savings account. But with comprehensive insurance, your insurance provider will help you purchase a new car if yours is stolen.
Comprehensive coverage is also helpful for people who can’t afford to pay much out-of-pocket if their car was damaged or destroyed. While your risk of hitting a deer is low, it’s a possibility. You could also have hail in your area that breaks your windshield.
Without comprehensive insurance, you would be responsible for paying for the damages in full. If your car was totaled, you would have to replace your car without any help from the insurance company. Depending on the extent of the damages and the cost of repairs, you could put yourself in serious debt.
The biggest takeaway is that comprehensive insurance gives you peace of mind knowing that your car is covered in almost any situation you might encounter. It’s a small price to pay to protect your car from unexpected situations that could be costly without insurance.
Comprehensive vs. collision
When purchasing insurance, it’s common to get comprehensive insurance confused with collision insurance. But the difference between comprehensive vs collision is simple.
Collision insurance covers your car after a collision, which includes any accident between two vehicles, in a rollover or if you hit an object. Comprehensive insurance covers your car in the situations that collision coverage does not. That includes theft, fire, falling objects and animal encounters.
Some auto insurance companies require customers that have collision insurance to add comprehensive insurance to their policy because collision claims tend to be more common than comprehensive claims. Check with your insurance provider to see what the requirements are for comprehensive coverage.
Can you add coverage to comprehensive insurance?
No, you can’t add coverage to comprehensive like you can with other policies. Comprehensive insurance comes with a set of standard coverages. These coverages are generally consistent among all auto insurance providers. Between collision and comprehensive, your car will be protected in nearly any situation you can imagine.
If you do want more coverage, talk to your insurance provider about increasing your coverage limits. It will raise your annual premium, but the insurance company will pay you a higher amount for a covered loss. You might consider this if you have a new car, drive a luxury vehicle that is expensive to repair or want to make sure you have fewer out-of-pocket costs if anything happens.