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What does comprehensive car insurance coverage mean?

fully comprehensive auto policies

Here's what you need to know...

  • A standard car insurance policy provides third-party liability coverage to protect your assets and your wages
  • While basic policies provide coverage for only third-party damages, it’s possible to buy optional coverage that covers damages to your vehicle and your person
  • If you purchase physical damage coverage to pay for your own repairs after a loss, you’ll need to decide between comprehensive-only or full coverage
  • Comprehensive is a form of physical damage coverage that will pay to either repair or replace the covered vehicle after a non-moving loss
  • Some of the different perils that are covered under comprehensive include: fire, theft, hail, vandalism, explosion, falling objects, glass breakage, and damage caused by live animals
  • While there isn’t a fixed limit as to how much comprehensive will pay, the policy will only pay up to the Actual Cash Value of the vehicle whenever a loss occurs

Auto insurance is a financial product that’s designed to help you pay for the damages and injuries that you cause in the course of operating your vehicle. If you own a car, there’s a strong chance that you’re required to buy this financial product in the state you live in. Unfortunately, even though auto insurance is a required product in virtually every state, it’s not a product the average person knows much about. Compare car insurance rates now by using our FREE tool above!

Shopping for coverage can be a daunting task when you’re not familiar with terms, conditions and policy provisions. One common term that you can benefit from knowing is comprehensive. Comprehensive is a form of coverage that’s not actually required by the state but that can truly be a financial safeguard to you after a loss. As an optional form of protection that compensates you rather than third parties, it’s an optional coverage to seriously take into consideration.

Understanding State Required Coverage

state laws for cell phone driving

Auto insurance requirements are set by state officials. In every state but New Hampshire and Virginia, motorists are required to either carry a minimum amount of insurance or satisfy other financial responsibility laws.

Even though the actual limit requirements are different from state to state, most of the time the coverage requirements are similar in nature. Instead of requiring that owners buy coverage to pay for their own damages, the state will require owners to buy coverage that pays for damages to others. This is referred to as third-party liability protection and it consists of Bodily Injury and Property Damage.

What’s the difference between Property Damage and Physical Damage coverage?

There’s a long list of auto insurance terms that you should know when you’re buying coverage to protect your finances. As you sift through some of the most common terms that you should know, you may discover that some of the terms appear to be similar when they actually aren’t. Two terms you need to be able to differentiate are Property Damage and Physical Damage. Here’s what each term means as it related to auto insurance coverage:

  • Property Damage:¬†Property Damage, which may also be transcribed as PD, is a form of third-party liability coverage that pays to repair or completely replace someone else’s property. PD only pays for third-party damages when you’re deemed primarily at fault for the loss. All policies, even basic ones, include Bodily Injury and Property Damage Liability coverage.
  • Physical Damage: Physical Damage is an optional form of coverage that pays for your own vehicle repairs. It consists of two separate coverage types called comprehensive and collision. Each coverage type will pay for the repairs or for replacement of the insured property after different types of losses.

Physical Damage coverage is never required by the state but may be required by your lender or lessor if you don’t own the vehicle outright. When filing a physical damage claim, you’ll first need to pay the deductible that you carry for the coverage type. You may carry comprehensive alone or both comprehensive and collision.

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What types of losses are covered under comprehensive?

Comprehensive, also commonly referred to as ‘comp’, will pay to restore your vehicle to its pre-loss condition after certain types of claims. It’s most common for comprehensive to pay for damages sustained to the vehicle while it’s parked but that’s not always the case. You can find a detailed list of the causes of damage that’s covered under comprehensive in your policy booklet. Here’s a list of perils covered under comp:

  • Fire damage
  • Theft
  • Damage from an act of vandalism
  • Flood damage
  • Falling objects
  • Explosion
  • Civil riot
  • Windshield damage or other glass breakage
  • Accidents with live animals
  • Damage caused by live animals (mice, birds or other animals)

How much coverage is afforded under comprehensive?

If you read through a quote or a policy, you might not see a fixed dollar amount that specifies just how much comprehensive coverage you’re paying for. This can be confusing because property damage and other forms of protection on the policy do have fixed limits.

When you’re paying for physical damage coverage, the limit can change as the value of your car changes.

This is why the limit you’ll find on your declaration’s page is labeled as the car’s Actual Cash Value. This means that the policy will pay no more than the fair market value of the vehicle for repairs or when the car is totaled. Some policies with special provisions may actually pay to replace newer cars. This provision is called replacement cost valuation.

What is a deductible?

help-me-find-money-saving-car-insurance.

When you buy physical damage protection you have to share some of the risk with the insurer. Risk is shared by asking policyholders to select a deductible. The deductible is the amount that you agree to pay towards repairs when a claim is filed. If repairs don’t exceed the deductible amount, you’ll handle the claim on your own. The deductible will be deducted from your payout and can range between $50 and $1000.

How much does comprehensive coverage cost?

The premium that you’ll pay for comprehensive coverage depends on the type of car that you carry. Not just does the vehicle type matter, but so does the deductible that you select and the claims data reported in the area that you live in. While carrying comprehensive does raise your premiums, it’s the more affordable option between comp and collision.

If you’re financing your vehicle or it holds some value, you might need comprehensive.

It’s important that you price the cost of comprehensive to weigh the pros and cons. If you can justify the cost and you feel more comfortable having the extra protection, it’s wise to pay the extra premium and carry the protection. To price the cost of comp, you can use an online comparison shopping tool. This will help you price the cost of coverage from carrier to carrier and how costs break down. Sift through the estimates, assess the costs¬†and then select the best fit for you.

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