Comprehensive Insurance

Fran
Jessica Nguyen
January 11, 2021

Comprehensive insurance, collision coverage and liability insurance are the three main components of an auto insurance policy. In some states, Personal Injury Protection (PIP) is required. In nearly every state, drivers are required to carry liability insurance but comprehension and collision are completely optional in many cases. It's important to note that in most cases, you have to buy collision insurance in order to buy comprehensive insurance. And if you are leasing or financing your car, the auto loan company will often require you to purchase collision and comprehensive coverage.

Do You Need Comprehensive Auto Insurance?

Among others, most choose not to purchase comprehensive insurance if

  • They cannot afford it.
  • They prefer to self-insure.
  • They paid off their car in full and aren’t required to have it.
  • Their car is not worth much.
  • They think they are at a low-risk for non-collision damages.

Consider the risks of not having comprehensive insurance:

  • Is your car new or does it have a high market value?
  • Do you live in a rural area with frequent animal collisions?
  • Is there a high rate of car theft or break-ins where you live?
  • Do you live in an area prone to extreme weather or natural disasters?
  • Do you have enough savings on hand to cover the cost of repairing or replacing your car?

How Comprehensive Deductibles Work

When you choose to purchase comprehensive insurance, you’ll choose a deductible; a deductible is the amount you’re responsible for paying out of pocket toward a claim before the comprehensive insurance kicks in. Deductibles can range anywhere from $250-$1,500.

As an example, let’s say you have a $300 deductible and filed a comprehensive auto claim for damage sustained during a car break-in. Essentially, you will get a check to repair any damages minus that $300 deductible. Or if the vehicle was totalled by a fallen tree, your insurer would subtract the $300 from your car’s actual cash value and send you a check for that remaining amount for you to replace it.

Comprehensive Coverage Deductibles

Like collision insurance, comprehensive insurance deductibles are based on perceived risk levels. When you’re choosing a deductible and you want to save money in the present, you can choose a high deductible because that correlates to a lower premium. But the problem with that in the future is that with that higher deductible, you’ll pay more out of pocket when you make a claim.

On the other hand, a lower deductible will increase your monthly premium but the amount you pay out will be less when you make a claim. On average, comprehensive insurance costs $25/month. We can compare not having comprehensive insurance to gambling against nature and thieves/vandals. Dropping comprehensive could save you $25/month but you’ll have to pay for the damages 100% out of pocket if you experience a loss or need to repair the car.

Examples of How Comprehensive Insurance Works

Broken Windshield Claim: Say you’re driving and all of a sudden, a rock hit your windshield and created a crack. You can actually call your insurer to help repair any cracks or replace it if it’s broken. In some cases, all you would have to do is to pay your deductible and the rest would be covered.

Hitting a Deer While Driving: Say you are driving home and you hit a deer. Thankfully you and the deer are ok, but the front of your car is smashed in. You might think because it’s a collision and that it would fall under your collision insurance, but in many cases coverage falls under comprehensive insurance.

Tree Falls Onto Car: Say your car is totaled by a tree that fell as a result of a storm. Your car is worth $8,000 and you have a $1,000 comprehensive deductible. If your car is declared a total loss, comprehensive coverage pays out that $8000 total worth minus the $1000 deductible. So, you’d receive a $7,000 check from your insurance company to help pay for a new car. If you didn’t have comprehensive insurance you’d get nothing back at all. And you’d be without a car!

Is Comprehensive Insurance Full Coverage?

It’s important to remember that comprehensive coverage is not unlimited. There’s a max amount your insurer will pay toward your claim, which is usually the actual cash value of your car.

Once the repair cost exceeds that value, or comes super close to it, your insurer would declare your car as a total loss. But if you choose to fix your car, they would subtract its salvage value from your deductible or if the repair costs cost more than your car’s actual cash value, they would pay out the depreciated value of your car minus your deductible.

What Does Comprehensive Insurance Cover and Not Cover?

Comprehensive insurance covers damages to your car that result from freak accidents out of your control. Comprehensive insurance is different from collision insurance in how collision is colliding with something else (other than animals) and comprehensive is basically every other bad-luck scenario under the sky.

Covers:

  • Theft
  • Vandalism
  • Striking an animal
  • Windshield and glass damage
  • Falling trees and other such objects
  • Natural disasters such as storms, hail, floods, earthquakes, fire

Does not cover:

  • Damage to another person’s car from a collision
  • Damages to your car from a collision
  • Medical expenses
  • Typical wear and tear
  • Custom equipment
  • Destruction by law enforcement
  • Theft of belongings inside your car
  • Mechanical or electrical failure unrelated to your collision

Helpful things to consider:

According to the National Insurance Crime Bureau, from 2016-2017, there have been on average 1,774,208 cars stolen per year, which is about one theft every 6.5 minutes. The states with the highest auto-theft rates are California, Florida, Washington, Texas, and Nevada.

Vandalism includes someone keying, spray-painting, and etc. If you can identify who vandalized your car, you can sue them for damages but if not, comprehensive coverage will help pay for the damages inflicted

Animal accidents are more common in central, non-coastal areas, especially if you live or drive in a highly wooded area. But if you swerve to avoid hitting an animal and end up hitting another car, it’s considered a collision and would be covered by collision insurance rather than comprehensive insurance.

If you live in a desert state, you’re at a much higher risk for glass claims, minor or major, because of the kicking up of rocks. Even small nicks can become serious fractures. In some states, some insurers might even waive the deductible for a broken windshield, so it’s worth it to do research on the policies of different insurers.

Do Comprehensive Coverage Auto Claims Count As At-Fault Accidents?

Comprehensive coverage claims do not count as accidents. Instead, accidents would fall under your liability or collision portions of the auto insurance policies.

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Does A Comprehensive Auto Claim Affect Your Insurance Rate?

It might be tempting to discard the idea of having comprehensive auto insurance as a way to keep your premiums low but the neat thing about non-fault comprehensive auto claims is that an insurer will not surcharge your premiums if you file one. Most insurance companies will not raise your premiums for filing a comprehensive claim, unless you're red-flagged for having more than a few comprehensive claims over a span of a short period of time.

How to Calculate Whether or Not You Should Get Comprehensive Insurance

There is a simple two-step calculation you can do on your own as a way to determine if it makes sense for you to add or drop comprehensive insurance.

Subtract your comprehensive deductible from the worth of your car in cash value.

Take that number and subtract the cost of your comprehensive insurance coverage

If you get a negative dollar amount, then you most likely do not need comprehensive auto insurance because you would be paying more for the coverage than what your car is worth.

If you get a small positive dollar amount, your claim check will be small but comprehensive may still be advantageous as it gives you the little extra money you might need.

If you get a large positive dollar amount, then comprehensive auto insurance will be super beneficial, especially if it’s an amount you cannot pay out of pocket.

The recommendation is that when full coverage costs 10% or more of your car’s replacement value, you can remove the comprehensive coverage. In the end, it’s important to remember that you should keep it for as long as possible until you can pay for damages yourself without it being a financial burden.

You can always add or drop coverage and increase or reduce your deductibles, so it’s not a finite decision. It’s good to revisit your needs as your car ages, if you move into higher risk situations, or etc. So, whenever you need an exact comprehensive insurance price, you can get an auto insurance quote using Smart Financial. Smart Financial has over 200 insurance companies as partners to make it easy for you to shop and find a policy that complements your specific needs.

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