What is comprehensive insurance?

In a nutshell

If your auto insurance policy includes comprehensive coverage, your insurer will help pay to repair or replace your car if it’s stolen or damaged in an incident other than a collision.

• Comprehensive coverage is not required by state law. However, if you finance your car with a loan or lease, the lender may require you to have it as part of your insurance policy.
• A better way to think of comprehensive car insurance is “other than collision” coverage.
• Types of events covered by comprehensive insurance are theft, vandalism and damage from severe weather.

What comprehensive insurance covers

Many insurance terms seem confusing or misleading. Comprehensive is one of them. While it’s understandable to think that “comprehensive” coverage must provide financial protection in any situation, it actually applies only in specific circumstances.

Sometimes referred to as "other than collision coverage" (probably a more accurate label), comprehensive insurance pays to repair or replace your vehicle if it's damaged due to an event out of your control. Some examples include:

• Theft and non-recovery.
• Vandalism.
• Fire.
• Falling objects, such as a tree branch.
• Severe weather, including floods, hurricanes, or hail.
• Hitting an animal.

Your policy contract should list exactly what events are covered by your comprehensive insurance.

Comprehensive is optional, though it's usually considered part of a "full coverage" car insurance policy. It’s available from established insurance companies such as State Farm, Nationwide, Amica, and others and from newer companies such as Clearcover.

How comprehensive insurance works: Your deductible and limit

When you add comprehensive coverage to your car insurance policy, your insurer will ask you to choose a deductible. Deductibles are usually offered in increments such as $500, $1,000, or $1,500. You’ll pick one.

This deductible is an amount of money the insurance company will subtract from their payout to repair or replace your car if you file a claim. Think of it as your “share” of the repair or replacement costs. Here’s an example:

• You choose a comprehensive deductible of $1,000.
• A hailstorm damages your car. You file a claim, and a body shop charges $5,000 for the repairs.
• Your insurance company pays $4,000 toward the repairs. You’re responsible for the final $1,000.

Deductibles represent a trade-off. Choosing a lower deductible means you’ll pay more in premiums for your policy, but you’ll have a lower share to pay for a covered repair. A higher deductible costs less in premiums but means you'll have a higher share at claim time.

Comprehensive coverage also has a limit. This is the maximum amount of money the insurance company will pay to settle a claim. The comprehensive limit is usually based on the car's actual cash value (ACV).

Another bit of insurance jargon: ACV is the value of your car in its current condition — factoring in depreciation. Because of this, comprehensive claim settlement amounts sometimes seem shockingly low to car owners. But understand that cars depreciate as soon as they're driven off the dealership lot (new cars depreciate 10% in their first month, according to Carfax). In other words, the ACV of a relatively new car is likely much lower than what the owner paid to the dealership!

Related: How does car insurance work?

What is a total loss?

If your car is damaged to the point where the cost to repair it would be more than the car’s ACV, the insurance company will declare it a total loss. In this case, the company will pay you a settlement amount based on the ACV, minus your deductible, taking possession of the title and (whatever remains of) the car.

Because the settlement is based on ACV, you’ll probably find yourself with far less money than you need to buy a new car. Check if your insurance company offers new car replacement coverage if this is a concern. This feature, which will cost you more in premiums, bumps up your total loss settlement to give you enough money to replace your car with a new car of the same or similar make and model.

What damage is not covered by comprehensive coverage?

Comprehensive does not cover any damage to your car resulting from a collision with another vehicle, damage you cause to another's vehicle, or any medical expenses. However, all of these can be covered by other coverages on your policy.

Difference between comprehensive and collision insurance

Comprehensive is often spoken about in tandem with collision insurance. Collision comes into play if your car is damaged in an accident with another vehicle or a stationary object such as a tree. Who’s at fault in the accident doesn’t matter (though if another driver is at fault, their liability coverage should help pay for your car’s damage).

Otherwise, collision works similarly to comprehensive. There’s a deductible, the limit is based on the car’s ACV, and the insurer will likely declare a total loss if the cost to repair exceeds that ACV.

Should I get comprehensive insurance?

Comprehensive insurance is an optional coverage. However, if you finance your car with a loan or lease, the lender may require you to have it (along with collision coverage).

Beyond that, you should strongly consider adding comprehensive coverage to your policy if the cost to repair or replace your car would really stretch your finances. Remember that many modern cars have sensors and other electronics that cost a lot to repair or replace. Even minor fender benders can damage sensitive and costly items, resulting in repair bills in the thousands of dollars.

Preserve the investment you’ve made in your car

Despite the label's implication, comprehensive coverage doesn't provide protection for every situation. But it can help you preserve the investment you've made in your car and should be something to consider adding to your insurance policy.

Frequently asked questions (FAQs)

Is comprehensive Insurance full coverage?

Comprehensive is one part of a full coverage car insurance policy. A full coverage policy typically includes bodily injury and property damage liability coverage, comprehensive and collision coverages, and any other coverage required by your state or lender.

When should I drop comprehensive insurance?

At one time, experts suggested dropping comprehensive once a car turned five years old or reached 100,000 miles. But with the cost of electronics in modern cars driving up repair costs, you may want to think differently about the decision to drop coverage. It might be worth keeping it as part of your policy for a while longer.

Just remember that the insurance company won't pay more for a comprehensive claim than the vehicle's actual cash value. If that value drops to a point somewhere at or slightly above your deductible, it may no longer make sense to have comprehensive. You can get an idea of your car's value using tools such as Kelley Blue Book or NADA guides.