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UPDATED: Mar 13, 2020
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Car insurance can be confusing for consumers, because there are a wide range of coverages and limits to choose from. The terms and conditions of an auto insurance policy can also be bewildering for most consumers. For some, comprehensive coverage can be particularly difficult to understand. Check your comprehensive car insurance today by putting in your ZIP code into our FREE car insurance search tool!
When you shop for car insurance online, you will likely have the opportunity to purchase comprehensive coverage as part of your auto policy package. Understanding how comprehensive coverage works can help you determine whether you need this coverage, and will help you know how this coverage can protect your finances.
Comprehensive Coverage is a First Party Coverage
It is important to understand that comprehensive coverage, unlike liability, is a first party coverage. This means that it provides payment to you if a loss occurs, instead of to a third party. If you sustain a covered loss, the company will provide you with a check to cover your expenses, which you can use to pay for your loss.
This coverage is a physical damage coverage, which means that it pays for damage to your vehicle, rather than for injuries you or your passengers sustain as a result of a motor vehicle accident. It is typically sold with collision coverage, which is another first party physical damage coverage.
Types of Covered Losses
Comprehensive coverage is designed to pay for specific types of losses. Unlike collision coverage, it does not pay if you are involved in a traffic accident with another driver, or if you crash into a stationary object such as a tree or utility pole.
This coverage pays to repair or replace your vehicle if it is vandalized. Weather-related losses, such as damage from hail, the weight of snow or ice, tornadoes, earthquakes, or wind are also typically covered.
Comprehensive coverage applies if your vehicle is damaged or destroyed by fire, or if a falling object, such as a tree branch, damages your car.Theft is also covered under comprehensive coverage. If your car cannot be recovered, this coverage pays to replace your car. If the vehicle is recovered but has sustained damage, comprehensive coverage pays for necessary repairs.
Curiously, a collision with an animal falls under your comprehensive coverage, rather than your collision coverage. If your car sustains damage when you hit a deer, bear, or other animal, comprehensive coverage will pay for repairs to your vehicle.
Comprehensive Coverage Limits
Comprehensive coverage works differently than liability and uninsured motorist coverages, which have a maximum specified payout per accident or loss. The limit of your comprehensive coverage is based on the market resale value of your car at the time of the loss, rather than on an agreed-upon limit determined when you purchase your auto insurance policy.
The market resale value is the amount you could have reasonably sold your car for if it had not been damaged or destroyed. Auto insurance companies use a variety of resources to determine the resale value, based on the age, make and model of the car.
Factory equipment such as anti-lock brakes, airbags, passive restraints, and stereo equipment can increase the resale value. Insurance companies also factor in aftermarket enhancements, such as chrome or alloy wheels, anti-theft devices, stereo upgrades and custom paint when determining the maximum payout you could receive under your comprehensive coverage.
The resale value is important because it reflects the maximum amount your insurance company will pay for a single loss under comprehensive coverage. If your vehicle sustains damage as a result of a covered loss, and the amount of the damage is less than the resale value, your insurance company will pay to repair the car.
Conversely, if the cost of the repairs exceeds the resale value, the company will consider the car a total loss, and will pay you the resale amount to put toward purchasing a replacement vehicle.
Keep in mind that previous, unrepaired damage can lower the resale value for the purpose of determining your comprehensive coverage limit. For example, if you backed into a light pole in a parking lot and crushed your rear bumper, but did not have the bumper repaired, this damage can reduce the maximum amount you can receive under comprehensive coverage.
Comprehensive Coverage Deductibles
Your comprehensive coverage will typically be reduced by a deductible, which you select when you obtain a quote and purchase a policy. A deductible is a set amount that you agree to pay toward a covered loss. If the insurance company pays to repair your vehicle, you will have to pay the deductible amount toward your repair costs. If the vehicle is rendered a total loss, the amount you receive to put toward a replacement vehicle will be reduced by the deductible amount.
The amount of your deductible affects how much you pay for comprehensive coverage. For example, if you choose a $1,000 deductible, you can expect to pay less in comprehensive premiums than if you had opted for a $250 deductible.
Keep in mind, though, that choosing a high deductible can create financial strain if a loss occurs. Before opting for a $1,000 deductible, make sure that you will have this amount available to pay toward vehicle repairs if your car is damaged, or toward a replacement vehicle if the car is rendered a total loss.
Policy Conditions and Exclusions
Your auto insurance policy contains information that can help you determine whether your insurance company will pay for a loss under your comprehensive coverage.
In order to maintain continuous coverage, you will have to make all of your policy premium payments on time. If you miss a premium payment, you may not have coverage available during the period between your due date and the date and time you make your payment. If your insurance company cancels or refuses to renew your policy for any reason permitted by your state’s insurance laws, the insurance company may similarly deny your claim.
Comprehensive coverage, like all coverages afforded under your auto insurance policy, is also subject to exclusions. These exclusions vary according to the provisions of your policy book. For example, if you engage in an act that results in intentional damage to your car, this coverage will typically not provide payment. Likewise, most insurance company policy provisions exclude damage that is caused by acts of war or civil unrest.
Other exclusions may also apply to this coverage. For example, if you orchestrate the fraudulent theft of your car, you cannot receive a claim payments under the comprehensive coverage portion of your policy. Similarly, illegal activities such as drag racing, driving under the influence of alcohol or drugs, and reckless operation may preclude claim payment.
The financial protection provided by comprehensive coverage makes it a valuable addition to your auto insurance policy, particularly if you drive a newer car. Although you will still typically have to pay a portion of the loss, comprehensive coverage can keep you from absorbing a large financial loss if your car is damaged or destroyed. Before damage is ever done to your car, check to see other competitive rates using our FREE car insurance search tool by putting in your ZIP code!