What Is Comprehensive Auto Insurance?

Definition and Examples of Comprehensive Auto Insurance

Comprehensive car insurance, also known as "other than collision" coverage, pays to repair your vehicle if it is damaged in an accident that is not the result of driving or even occurring on the road. They could, for example, involve animals, falling objects, fire, vandalism, or weather events. Comprehensive insurance will also assist in the replacement of your vehicle if it is stolen.

Here are some other terms for comprehensive coverage:

• Comp
• Other than Collision
• Storage Insurance
• Fire and Theft

What Does Comprehensive Insurance Cover?

Comprehensive car insurance only covers losses resulting from events other than a normal collision with another vehicle or an object, such as a fence or telephone pole. Although damages caused by hazards "other than collision" may appear to be broad, comprehensive coverage has limitations. They only include a few types of dangers:

• Contact with animals, such as colliding with a deer
• Windows or windshields that are broken, chipped, or cracked
• Earthquakes, floods, hail, hurricanes, and tornadoes are all examples of natural disasters.
• There were explosions, fires, and smoke.
• Objects that fall, such as a tree limb
• Auto theft, stolen parts, or damage caused by a car break-in
• Vandalism, for example, if someone eggs or keys your car.

Comprehensive policies differ depending on the insurer. Some providers may include a few extras, such as rental car reimbursement and towing, in their comprehensive coverage. Others may only cover these costs if you purchase the optional extras.

A broken window or windshield may also be covered by comprehensive coverage. Glass repairs are subject to your policy's deductible, so you'll have to pay something out of pocket first. However, some insurers provide "full glass coverage," while others provide full glass coverage with no deductible. 

What Does Comprehensive Insurance Leave Out?

Collision damage is not covered by comprehensive insurance. This is true whether you collide with another vehicle or an object such as a building, fence, or utility pole. Collision insurance is required to cover these types of damages. Damage caused by hitting a pothole is also excluded, as is normal wear and tear on belts, brakes, hoses, tires, and windshield wipers.

How Comprehensive Auto Insurance Works

Assume you come out of your house after a windy night to find a tree branch on your car's roof, leaving a massive dent. This type of damage is covered by your comprehensive insurance, so you can file a claim and wait for your payout. Here are some fundamental factors that will influence the process and the payout.

Deductibles

A deductible applies to comprehensive auto insurance. Choosing a high deductible can help you keep your premiums low. However, it also limits the amount of money you can receive if you file a claim. For example, if you have a $1,000 deductible and your vehicle sustains $1,500 in storm damage, you will be responsible for $1,000 in repairs while the insurance company will pay only $500.

Often, you can select a comprehensive deductible in addition to the one on your collision coverage. You could, for example, select a $2,000 collision deductible but a $500 comprehensive deductible.

Your deductible can be determined by how much you can afford to pay out of pocket. If you can afford minor repairs, such as a chipped windshield, a $1,000 or higher comprehensive deductible may be a good option. However, if your car is stolen, the payout may not be sufficient to replace it. Choose your deductible carefully because it will apply to every claim you file.

Actual Cash Value Payout

Comprehensive insurance typically pays the actual cash value of your car if it is stolen or completely destroyed by a covered peril such as a flood. This is not the price you paid for the car. Actual cash value is a method of calculating a figure that is closer to the current market value, or how much someone might pay to purchase your car at the time of the event.

Actual cash value depreciates the value of your car based on its age, condition, make and model, and mileage. The average car loses 49.1 percent of its value in the first five years, but rates vary greatly. A Jeep Wrangler, for example, will depreciate at a rate of about 32.8 percent in its first five years, while a Lincoln MKZ will depreciate at a rate of 67.1 percent.

The actual cash value of your car and the deductible on your policy work together to determine how much you'll receive if it's stolen or totaled. For example, if your 2018 Chevrolet Malibu was stolen and you had a $500 deductible, your maximum payout would be $9,822. However, if you had a $1,000 deductible, your maximum payout would be $9,322.

Gap Insurance

Because cars depreciate so steeply and quickly in their first five years, you may want to consider adding gap insurance if your vehicle is newly financed or leased. It is required by many car dealers and lenders. If your financed vehicle is stolen or totaled within the first few years, the insurance payout will most likely be insufficient to pay off your auto loan.

However, if you purchase gap insurance, the coverage will cover the difference. Assume you pay $34,412 for a new 2021 Toyota Highlander 4WD. If it is stolen in the first year, the insurer will most likely settle for $32,086. If you don't have gap insurance, you'll be liable for $2,326 in unpaid car payments. However, if you do, the coverage will kick in to fill the void.

Gap insurance is recommended if you:

• Finance a vehicle for at least five years.
• Rent a vehicle
• Make a down payment of less than 20%
• Buy a car with a high depreciation rate
• Roll over negative equity from a previous car into a new car loan

How Much Does Comprehensive Coverage Cost?

Comprehensive coverage can be reasonably priced for the majority of drivers. The cost varies depending on the vehicle and the driver, with premiums adding about $134 per year. If you don't have coverage, even a windshield replacement can cost hundreds of dollars, and cracked windshields are common. Adding comprehensive coverage to your policy could save you hundreds or thousands of dollars in repair costs.

Do I Need Comprehensive Insurance?

Comprehensive auto insurance is not required by state law. Most leasing companies and lenders, however, require you to purchase coverage for leased and financed vehicles. Lenders won't have much to say after you've made your final car payment, so it's up to you. However, you should consider your own situation before making a decision. It may still be a good idea if you can afford comprehensive coverage.

Consider whether you can afford to buy a new car if yours is stolen or totaled due to a covered peril. If you don't have the money to buy a new car or even put down a down payment, comprehensive coverage can provide valuable financial security. To take it a step further, consider your car's current role in your life. Do you use it as a mode of transportation to get to work? What would it cost to arrange alternative transportation if you lost it? As you can see, many personal factors can influence your decision.

One Method to Help You Decide

When considering comprehensive insurance, first determine the value of your vehicle. Consumer websites such as Kelley Blue Book can estimate the value of your vehicle based on its age, condition, location, mileage, make, and model. If your car is worth $2,000 or more, you should consider purchasing comprehensive insurance. However, once its value falls below $1,000, you may no longer require it, especially when the cost of meeting the deductible is considered.

Comprehensive Insurance vs. Collision Insurance

Many people are perplexed by the fact that their vehicle is covered by more than one type of insurance. It's important to note that collision and comprehensive coverages do not overlap. If your car is damaged or totaled in a collision with another vehicle or object, collision insurance will pay to repair or replace it. Non-collision losses caused by a defined set of hazards are covered by comprehensive coverage.