What is the Meaning of Comprehensive Insurance?

In today’s advanced world, there are many types of insurance policies available. These are to protect you in various situations and are overall a good asset to have.

One of these insurance policies include comprehensive insurance.

What is the Meaning of Comprehensive Insurance?

As per the comprehensive insurance definition, it is a kind of auto insurance that provides coverage to your car from any damages resulting from causes other than collision. For example, comprehensive insurance will provide coverage for your vehicle if it has been dented by a run-in with a deer, destroyed by a tornado, damaged by a vandal, among other causes.

What is Comprehensive Car Insurance?

Auto insurance policies have three main parts: comprehensive, collision, and liability coverage. Liability insurance is required by state law, while comprehensive and collision coverages are optional. However, if you’ve financed your car, your lender may require comprehensive insurance. If you own your car outright, you can opt out of comprehensive insurance, especially if your car is older, has low value, or you prefer to self-insure.

If you live in an area with frequent animal collisions, hailstorms, or high rates of vandalism, comprehensive insurance may be a smart choice. Comprehensive and collision coverages each have their own deductibles. Your deductible choice depends on your budget and perceived risk.

For example, if you want lower premiums, you could opt for a higher deductible while keeping comprehensive coverage. But remember, the higher your car’s value, the more expensive comprehensive insurance will be.

Here’s how a claim works: If your car, worth $10,000, is destroyed by hail, and your comprehensive deductible is $1,000, the insurer would pay $9,000. Without comprehensive coverage, though, neither collision nor liability insurance would cover this, and you’d have to pay the entire $10,000 out of pocket. This might mean taking a loan or buying a cheaper replacement if funds are tight. Comprehensive insurance provides peace of mind in situations like these, covering your car from various non-collision risks.

How to Choose a Comprehensive Coverage Deductible

Comprehensive deductibles are usually offered by insurers in set increments such as $500, $1,000 or $1,500. As discussed above, if you want your premiums to be lower, you can choose a higher deductible. This can save a lot of money upfront as you might not even have to pay the deductible. Likewise, having a lower comprehensive deductible means the amount you pay in premiums will automatically be higher. This is the best option for people who live in a high risk zone where tornadoes, hailstorms, crimes like theft and chances of animals colliding with your car are high. With a high risk like this, it is likely that you will have to file a comprehensive coverage claim more often than not and you would be able to save yourself from paying high deductibles everytime you file a claim.

If you are not convinced about comprehensive insurance benefits and are still wondering why you would buy comprehensive coverage, here are a few factors that might put everything in perspective.

Why Buy Comprehensive Coverage?

• Comprehensive insurance coverage is usually required by your vehicle’s lender if you are leasing or financing your car. It is a requirement for you to have comprehensive and collision coverage until the vehicle has been paid.
• The worth of your car and how old it is. Once you have paid off your car, comprehensive coverage is optional. However, it may be a good idea to find out the value of your vehicle. To do so, you can use an insurance calculator usually available on every insurance company’s website that offers auto insurance.
• Once you know what your vehicle is worth, you need to determine whether or not you can afford to repair or replace it in case it is stolen or damaged in an accident? If you cannot afford to pay much out of your pocket then buying optional coverage plans like comprehensive and collision will be a smart move.
• How much are the annual premiums? It is recommended by the Insurance Information Institute to take the amount you would be paying for comprehensive and collision coverage in a year and multiply that by 10. If your car is worth less than the sum you get then getting comprehensive or collision coverage may not be the best option for you. However, you should talk to your insurance agent to figure out what option would be the best fit for you considering the value of your car and the ability to pay for the premiums.

The Bottom Line

Understanding comprehensive insurance shows how it can be a valuable investment based on your financial goals and vehicle risk level. Now, the key decision is whether it truly fits your needs. If not, consider other options. However, if it aligns with your needs, this insurance can be a smart, cost-effective choice that will benefit you in the long run.