Comprehensive Insurance Definition: What Is Comprehensive Insurance And Why Do You Need It?

It makes complete sense to have comprehensive car insurance if you're buying a brand-new car. Comprehensive insurance, which covers certain damages to your vehicle that are not caused by a collision with another car is a valuable insurance type that shouldn't be overlooked. And if you are thinking of getting one or want to have a comprehensive insurance definition, this guide is for you!

What Is Comprehensive Insurance?

Comprehensive insurance is a type of car insurance that protects your vehicle from damages that aren’t caused by a collision with another vehicle. It is necessary for leased automobiles as well as vehicles that are currently being financed. Comprehensive auto insurance is supplemental, which means it is an add-on coverage that may be added to an existing policy.

You can combine comprehensive coverage with liability and collision coverage for optimal protection, or go for vintage car insurance, which offers flexible usage and coverage tailored to classic cars.

If you’re asking, “How can comprehensive insurance help me?” Consider the following scenario: You’re rushing out the door for work in the morning, and as you open the driver’s side door, you notice a baseball-sized rock of hail has smashed through your windshield. You reason to yourself that under my state-minimum insurance policy, any windshield damage is treated the same.

We don’t want to disappoint you but still, we have to tell you that you are wrong!

What comprehensive insurance does and does not cover?

Your comprehensive insurance pays for damage caused by:

  • Natural disasters, like hurricanes or tornadoes
  • Vandalism
  • Theft
  • Fire
  • Falling objects
  • A civil disturbance, like a riot
  • Hitting an animal, like if you hit a deer
  • Glass damage

Your comprehensive car insurance policy will not help cover:

  • Damage to your car from a collision
  • Medical expenses
  • Legal fees
  • Lost income for you or your passengers if you miss work after an accident
  • Damage to another person’s car from a collision
  • The property was stolen from your car

Is there a difference between comprehensive coverage and full coverage?

Yes, there is! Some individuals wrongly use these terms interchangeably, however, there is a significant difference. Most insurance companies do not provide “full coverage.” To put it another way, there is no one-size-fits-all auto insurance policy.

As mentioned, comprehensive insurance is an optional coverage that can be added to your state-required liability insurance which provides additional protection for accidents not caused by a vehicular collision. Instead of having a single super policy, you can mix and match several forms of coverage.

How Much Does Comprehensive Insurance Cost?

According to the Insurance Information Institute, the average cost of comprehensive automobile insurance in the United States per year was around $170 in 2018, the most recent year for which data is available. The cost of comprehensive automobile insurance can vary depending on several factors, that include:

  1. History of driving
  2. Model and year of the vehicle
  3. An amount that can be deducted

If you plan to purchase comprehensive auto insurance, choosing a higher deductible can help you save money on your monthly rate. However, if you have an accident, you will have to pay more out of pocket. In most circumstances, you’ll want to choose your deductible based on the real cash value of your vehicle (ACV).

If your vehicle is damaged, you are assisted by the co-workers of your comprehensive insurance company. If the cost of repairs exceeds your car’s ACV, it’s totaled. In this case, the company pays the sum of its ACV to you to help replace it. When deciding how much car insurance you need, it’s important to think about the ACV of your vehicle.

Who Needs Comprehensive Coverage?

Comprehensive automobile insurance is available to drivers all around the country. If you reside in a location where theft, vandalism, or natural catastrophes are common, this supplementary coverage is extremely beneficial. This policy, for example, can help protect your automobile against the costs of non-collision damage if you reside on the Florida coast or in a wildfire-prone location.

You can ask yourself the following questions to determine if you require this coverage:

  • Is comprehensive coverage required by your auto lender? They almost certainly do if you lease or finance, and you won’t be able to get your automobile without it.
  • What is the value of your automobile? This coverage may not be worth it if it is less than the cost of your insurance premium.
  • Drivers across the country can benefit from comprehensive car insurance. This optional coverage is especially helpful if you live in an area with a lot of theft, vandalism, or natural disasters. For instance, if you live on the Florida coast or in an area with wildfires, this coverage can help protect your car from the costs of non-collision damage.

Comprehensive Insurance vs. Collision Insurance

It’s a good idea to have comprehensive vehicle insurance if you’re buying a new car, whether you finance it or pay cash. Comprehensive coverage can protect you from minor and major damages caused by occurrences beyond your control, regardless of whether you have accident coverage.

When selecting when to purchase comprehensive coverage, where you live can also be a factor. Comprehensive insurance may be required if a person lives in a rural area where animal collisions are common or in a stormy environment where hail is widespread. If a person lives in a high-crime part of town, where break-ins and theft are regular, the same can be stated.

Collision insurance protects you in the event of a single-car rollover, a collision with another vehicle, or a collision with an object. Break-ins, thefts, and damage caused by the weather are not covered. If you lease a car, you will be required to purchase collision insurance. When you’re in an accident, collision insurance comes in useful to help pay for the repairs to your vehicle, as well as any damage caused by potholes on the road.

In the event of an accident, neither of your insurance policies will cover your medical expenses or damage to another person’s vehicle.

Average cost per year of collision and comprehensive insurance

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  • Your Vehicle’s Value May Not Be What You Think It Is

Calculating the cost of dropping collision and comprehensive insurance requires determining the worth of your vehicle, not as you see it, but as the insurer sees it. If the car or truck is totaled in an accident, the insurer will compensate for the actual cash worth of the vehicle, which is usually the wholesale price at auction rather than the sticker price on the dealer’s lot.

These prices are nearly always substantially lower than Edmunds and NADA Guides resale values.

  • Weighing the Deductible

Car owners must also consider the potential insurance payment of any collision or comprehensive claim in advance. Deductibles apply to both of these coverage kinds, lowering the amount of any insurance claim check. If you choose a high deductible when you get the coverage, it might be thousands of dollars. A $2,000 deductible on a $5,000 complete loss car is only $3,000.

You can choose a significantly smaller deductible, such as $250 or even zero, but your rates will be higher.

“The biggest myth is that you should just get the lowest deductible,” Poe says, “because the lower the deductible, the more the risk to the insurer that you’ll submit a claim.”

Poe makes the analogy to health insurance. The lower your deductible (the amount the policyholder pays for a doctor’s appointment), the more visits you’ll have. This is also true for auto insurance. With a low deductible, the automobile owner is more likely to file claims with the insurance company for minor parking lot dings that they could either fix themselves or ignore.

“Having a large deductible may save you money in the long run,” Poe explains. “If you file a claim and the cost to your insurer surpasses $1,000, you may be charged a higher rate for the next three years.”

Making the Decision to Drop

When an automobile is five or six years old, or when the mileage reaches 100,000, the general rule of thumb used to be that collision and comprehensive insurance should be dropped. (There are other websites that comment on this.)

However, it now relies on the car’s worth and replacement parts. A Mercedes, for example, may be worth the cost of collision and comprehensive coverage for several years longer than a Nissan Sentra. Furthermore, replacing parts may be so costly that they quickly exceed the deductible.

“These days you’re fixing a computer, not just a car,” says Poe, who had to replace the headlamp on his Cadillac Escalade at a cost of $2,349.

Older automobiles, which are still usable but have lost a significant portion of their worth due to depreciation, have their own calculus. It makes it reasonable to drop one or both of these coverages when insuring these automobiles. That’s because your maximum payout—the value of the car minus your deductible amount—will almost certainly be insufficient to justify the insurance premiums over time.

Owners of classic and vintage automobiles must make specific considerations. Classic automobile insurance is frequently carried by owners of vintage vehicles. Instead of depreciation, these policies are based on the car’s “agreed value.” And it could be depending on the car’s condition or the cost of the special-order parts required to fix it.

What About Dropping Just One?

So, given the cost of collision and comprehensive insurance, as well as the potential payments, would it make sense to keep one and drop the other at some time, and can you do so?

Yes and yes, respectively. Poe and Worters both agree that comprehensive insurance is a better value for the money than collision coverage, despite the fact that insurers typically sell both together and drivers of older cars frequently drop them at the same time.

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“Bet On Yourself To Be A Safe Driver”

“Bet on yourself to be a safe driver,” Poe says when considering auto insurance coverage, noting that “95 percent of all drivers haven’t had an at-fault collision in three years.” This minimizes the need for collision insurance, which pays for repairs if your automobile collides with a building, a tree, or another vehicle.

Comprehensive insurance, on the other hand, covers a wide range of issues that don’t usually involve your own driving, such as fire and roof-crushing tree branches.

Hail storms are a common hazard, particularly to car windshields, which are also vulnerable to road trash picked up and flung by car and truck tires. In some places, insurers are now required to fix the damage

And who can forget about the threat of a natural disaster? An estimated 250,000 vehicle owners lost their cars in 2012 when Superstorm Sandy inundated the New Jersey and New York coastlines.

Ultimately, like most forms of insurance, it comes down to peace of mind.

“Before dropping comprehensive and collision,” says Bach, “ask yourself: “What’s my plan to replace the car if it’s lost?”

What If I Plan to Keep My Car for a Long Time?

Car owners that place a premium on durability and dependability frequently intend to maintain their vehicles for as long as feasible. According to a survey by iSeeCars.com, over 14% of Toyota Prius owners keep their cars for 15 years or more. The study looked at over 660,000 cars from 1981 to 2005 to see which sorts of cars the original owners are most likely to keep for at least 15 years.

If you want to keep your automobile on the road for more than a decade, consider the cost of collision and comprehensive insurance over a number of years versus your maximum insurance payment (the value of the vehicle minus your deductible). Once your collision and comprehensive insurance bills, over five or so years, approaches the potential insurance payout, it’s probably not worth keeping the extra coverage.

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A third-party car insurance coverage is the most basic and legal type of car insurance policy you’ll need if you don’t want to go with a comprehensive policy. This will only protect you from damages and losses caused by a third party and will not cover your own damages, as the name implies.

Third-Party Insurance

Third-party insurance offers protection against damages to the third-party by the insured vehicle. It covers physical injuries, damages to the vehicle, damage to the property, and death. Exclusions. Third-party insurance does not provide any compensation, if: The accident was caused due to drunken driving.

Benefits of Buying a Third-Party Car Insurance

1. Covers for Third-Party Liabilities

A third-party car insurance coverage is the most basic and legal type of car insurance policy you’ll need if you don’t want to go with a comprehensive policy. This will only protect you from damages and losses caused by a third party and will not cover your own damages, as the name implies.

2. Protects your Pocket from Traffic Fines

Since the law makes it mandatory to have third-party car insurance, not having one can lead you to pay hefty penalty fines. Therefore, having third-party car insurance can protect your pocket from spending on traffic fines!

Exclusions in a Third-Party Car Insurance

1. Own Damages

As the name suggests, third-party car insurance will only cover third-party-related liabilities, and damages to one’s own car won’t be covered under this policy.

A third-party car insurance coverage is the most basic and legal type of car insurance policy you’ll need if you don’t want to go with a comprehensive policy. This will only protect you from damages and losses caused by a third party and will not cover your own damages, as the name implies.

2. Drunk Driving or Without a Driver’s License

Third-party car insurance won’t cover your third-party claims if you were found driving under the influence of alcohol, or without a valid driver’s license.

3. Driving without a valid Driving License holder

If you hold a learner’s license and were driving without a valid driving license-holder in the front passenger seat – then your claim in those situations won’t be covered.

Difference between Third Party Insurance and Comprehensive Insurance

Third party and comprehensive insurance differ from each other regarding their purpose and coverage.

  Third Party Car Insurance Comprehensive Car Insurance
What is it? This is the most basic car insurance plan that only covers for damages and losses your car could cause to any third-party person, vehicle or person. This is an all-round cover for your car- it only takes care of your third-party liabilities but also covers for you and your own car.
Coverage Details It only offers coverage for third-party damages and losses such as if due to an accident or collision, you hurt a third-party person, his/her vehicle or a third-party property. Additionally, it also includes a personal accident cover to protect you from personal injuries or death. The coverage under this is extensive as it not only protects you against damage and losses caused to any third-party but also covers for damages and losses to you and your own car. For example: If your car faces damages due to the floods in the city, your comprehensive car insurance will cover for it.
Advantages It protects you in case you accidentally hurt somebody on the road, or damage one’s vehicle/property.  This way, you know you don’t have to dent your pocket in the case of such incidents. It protects both damages to your own car and third-party damages as well. So, no matter what- you know you won’t end up in any losses! Additionally, you can also benefit from an NCB (No Claim Bonus) during car insurance renewals for every year you don’t make a claim!
Limitations It doesn’t cover damages to your own car. It is slightly more expensive than third-party car insurance.
Customization No customizations are possible under this car insurance plan. You can customize your car insurance plan by adding specific add-ons and covers such as the zero-depreciation cover, engine and gearbox protection, Return to Invoice, Breakdown Assistance, etc
Premium Price Cheaper than a comprehensive car insurance policy, the premium price here is predetermined based on your car cc. Although higher in price, the premium here is based on many more factors such as the city you drive in, your car’s make and model and of course, the add-ons you opt for (if any).
What should I go for? If you are currently driving a very old car, or you rarely drive then maybe having a basic third-party insurance would be sufficient for you. Although slightly more expensive, this plan would give you complete coverage, proving to be more beneficial. Additionally, even if you don’t make any claims in a year, you can benefit from a No Claim Bonus discount during renewals.

Reasons You Must Upgrade to a Comprehensive Car Insurance

1. To Cover for Your Own Damages

You need to get covered for your own car’s damages and losses that could arise due to unforeseen circumstances that include but are not limited to accidents, collisions, monsoon floods, fire, et al.

2. To Cover for Third-Party Liabilities too

You can cause damages to other vehicles and therefore need to get covered for all third-party-related liabilities such as hitting and damaging someone’s vehicle, injuring a third-party person, or damaging someone’s property.

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3. To Customize your Policy for Better Coverage

Customize your car insurance further by opting for different add-ons and covers that would give your car better coverage. For example: Opting for breakdown assistance/roadside assistance in your policy gives you the benefit of asking for our help for matters both big and small. Similarly, opting for a zero-depreciation cover ensures we don’t deduct your car’s chargeable depreciation during claims.

4. You can Customize your IDV

Under our comprehensive car insurance policy, you also have the option to customize your car’s IDV.

5. Personal Accident Cover Included

With a comprehensive car insurance policy, you don’t need to separately opt for a personal accident cover as a comprehensive policy automatically covers it all.

Note: If you currently have a third-party liabilities policy only that is yet to expire, you can go for a separate Own Damage Only Policy, to get coverage on your own car.

Charles Bains

Charles Bains

Charles Bains started his insurance career as a marketing intern before pounding the pavement as a commercial lines agent in Orlando, FL. As an industry journalist, his articles have appeared in a variety of trade publications. His insurance television career, short-lived but glorious, once saw him serve as the expert adviser on an insurance-themed infomercial (yes, you read that correctly). Having recently worked for various organizations, coupled with his broader insurance knowledge, Charles is able to understand our client’s needs and guide them accordingly. He is a gem for Insurance Noon as his wide area of expertise and experience have been beneficial in conducting further researches to come up with solutions and writing them in a manner which is easy for everyone including beginners to comprehend.

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