Comprehensive is a type of auto insurance coverage that protects your own vehicle. Eve though it’s not mandatory, it has many benefits especially if you own a new car. Now let’s look at what it covers.
Generally speaking, if your car suffers damage and it’s not because of an accident, you need comprehensive coverage. It will cover repairs or replacement of your car after you pay for the out-of-pocket deductible. Comprehensive insurance is limited to the actual cash value of the vehicle.
Some common causes of damage include fire, theft, vandalism, natural disasters, falling objects, or hitting an animal. Other than these events, comprehensive coverage also cover explosion, earthquake, windstorm, hail, water, flood, vandalism & Malicious Mischief, Riot & Civil Commotion and glass breakage.
So what is not covered?
- Damage to your car or another car: This should be covered by collision coverage. Don’t get confused about collision and comprehensive coverage. They are easy to differentiate. If you are involved in a collision accident with another object, say another car, a fence or a street sign, you would need collision coverage. It has a deductible that you should pay before receiving the benefit.
- Injuries or fatalities: This should be covered in Bodily Injury section of the policy.
- Your (or Your passenger’s) Medical expenses after an accident: This should be covered by your Personal Injury Protection.
Now let’s see how the deductible work. Say you choose $500 deductible, and your car is damaged by a windstorm. If the repair costs $2000, you will pay for $500 and the rest will be covered by insurance company.
However, there is a limit your policy will pay toward a covered claim. Generally it will not cover more than it’s actual cash value. Each insurance company has auto adjuster who will evaluate your car damage and tell you if it’s within the actual cash value of the car, which means if it’s even worth repairing. If not, they will total your car and give you that limit.
Why buy comprehensive coverage? Here a few considerations:
- Is it required by your car’s lender? If you are leasing or financing a new car, they will require you to add comprehensive and collision coverage to the auto policy. The reason is simple—you are not the owner of this vehicle yet. You can remove this coverage when you pay off your vehicle.
- How old is your car and how much is it worth? Find out how much is the actual cash value of your vehicle. Can you afford to repair or replace your vehicle if it were damaged in a natural disaster or stolen? If not, then buying comprehensive coverage may be a good choice.
- How much is the premium for comprehensive and collision coverage? Do this simple trick, take the amount you’d pay for these two coverage in one year, then multiply by 10. Is your car worth less than that number? If yes, then it may not be cost-effective for you.
Hopefully this article helps you understand the ins and outs of comprehensive coverage and make a smart choice.