Do I need comprehensive auto insurance coverage?

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Things to Remember...

  • Comprehensive auto insurance is optional insurance, not required by law in any of the states of the U.S.
  • Automobile insurance coverage broadly falls into two categories: coverage for property damage (usually, but not always, damage to a vehicle) and coverage for injuries to people
  • Comprehensive coverage does not cover normal wear and tear, nor does it cover any of the contents of the car
  • Once the annual premium equals ten percent of the blue book value of the vehicle, it is time to consider canceling comprehensive coverage

Automobile insurance coverage broadly falls into two categories: coverage for property damage (usually, but not always, damage to a vehicle) and coverage for injuries to people.

The first type is broadly subdivided into “collision” and “other than collision” (OTC) – the latter type is also called comprehensive auto insurance coverage. 

It is important to understand these two types of insurance before searching for the best insurance rate for you.

Enter your ZIP code into our FREE comparison tool to compare rates!

Collision Coverage

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Collision insurance is coverage for an accident involving another vehicle. It does not cover other types of accidents, like hitting a tree or an animal that has run out into the road in front of you.

These types of incidents are covered by comprehensive auto insurance.

Broadly speaking, comprehensive auto insurance covers any accidental physical damage to the insured vehicle other than that caused by a collision with another vehicle.

In addition to accidents involving property or animals, it also covers things like falling trees, flood damage, fire damage, damage from projectiles, damage from severe weather events (hail, tornadoes), and theft or vandalism.

Comprehensive Coverage

Many people find the term “comprehensive” misleading or confusing. Some people jump to the erroneous conclusion that it covers any and all physical damage not covered by the collision portion of their policy.

However, comprehensive coverage does not cover normal wear and tear, nor does it cover any of the contents of the car.

Some things you might consider to be part of the car may also not be covered – for example, an upgrade to an expensive stereo system. It also typically does not cover damage to the tires or vandalism by family members or employees.

If in doubt, ask your agent what your policy covers exactly. If necessary, consider getting an additional rider to cover any special upgrades that are important to you.

When do you need comprehensive coverage?

Comprehensive auto insurance is optional insurance, not required by law in any of the states of the U.S. However, it can be required as a stipulation of the financing company.

In other words, if the car is still being paid off, the financing company may require comprehensive coverage.

If you paid cash for your car or if your car loan has been paid, you can choose to forego this type of coverage.

In some cases, skipping this type of coverage is a financially wise move. In other cases, it is not.

If your car is not worth more than a few thousand dollars and if there is no reason to believe the car is at higher than normal risk for the type of damage in question, it is usually best to drop comprehensive coverage as soon as you can.

The auto insurance company will not pay more in damages than the resale value of the car (or the amount that would “total” the car), so a low-value vehicle is not really worth the cost of additional coverage.

One reason some people keep comprehensive coverage is when the vehicle is at a higher than normal risk of being stolen, either due to where you live or because it is a “popular” car to steal among car thieves.

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What is the cost of coverage?

As with any type of auto insurance, if you can afford to absorb some out of pocket costs, a higher deductible can help bring the cost down.

For example, if you have more than a few thousand dollars in a savings account, you can probably comfortably cover a thousand dollars out of pocket in case of a covered incident with your car.

Raising your deductible from the minimum to one thousand dollars can lower the premium.

Other factors which influence the premium include the value of the vehicle, the age and driving record of the driver, how many miles per year the vehicle averages, and your neighborhood.

Comparing prices between different auto insurance companies online is always a good idea.

Like other types of insurance, the monthly premium is dependent on so many variables that the only reliable way to determine it is to seek a quote from an insurance company. Comprehensive insurance can be as much as one-third of the total premium for your total auto coverage.

As a general rule of thumb, once the annual premium equals ten percent of the blue book value of the vehicle, it is time to consider canceling this portion of your auto insurance (if it is not required by a third party).

Getting Both Types of Coverage

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Most states require liability auto insurance for a car. Some states have provisions for getting around this requirement, like having a bond for the vehicle.

Comprehensive coverage is optional but since the vast majority of car owners require financing, it winds up being required for most cars.

In most cases, insurance companies offer both collision and comprehensive coverage as a package deal. Under some circumstances, the two can be purchased individually.

Our FREE comparison tool can help you find out what coverage you need. Get started by entering your ZIP code below! 

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