What is Comprehensive Insurance

Comprehensive Insurance is probably the worst name ever given to a piece of insurance coverage. On one hand, it sounds like a piece of artwork: “Oh that insurance is comprehensive coverage.  Hand crafted in the 1800’s by the son of Charles Dewey.”  On the other hand, it sounds like a great level of insurance protection.  Somewhere out there is something called “average” insurance coverage therefore, “comprehensive” coverage is better.

The truth is it is neither.

Comprehensive coverage is insurance protection for damage to your car caused by events, over which you have no control.

Here are some examples of what Comprehensive covers:

  1. Heavy winds cause a branch of a tree to come down on a car and damage the trunk. I had a similar experience with my own car and wrote about it here.
  2. While driving on the Garden State Parkway from a weekend in Cape May, a truck kicks up a rock that damages a car’s windshield.
  3. In Ocean City, NJ, a parked car is flooded by rainwater that collected in the street from a heavy rainstorm.
  4. A deer runs out of the woods and collides with a car.
  5. Someone steals a car.
  6. Your crazy ex-girlfriend dug a key in the side of your souped-up four-wheel drive, carved her name into the leather seats, took a Louisville slugger to both headlights, and slashed a hole in all four tires.

What is the common theme in these examples? Something in nature caused damage or someone committed an act of vandalism or theft.  This is the essence of what we call Comprehensive Physical Damage.  If you said that I am a fan of Carrie Underwood, you would also be right.

I only gave six examples but could go on with many more to illustrate how comprehensive coverage works.

Here are some things that Comprehensive coverage would not cover:

  1. Mechanical breakdown of a car’s engine.
  2. Road damage to the car’s tires.
  3. Wear and tear.
  4. Radios or other electronic equipment that transmits or receives audio, video, or data that are not permanently installed in a car.

Let us contrast this with a companion coverage called Collision insurance. This coverage gives protection for damage to a car while you’re driving and collides with someone or something.

Here are some examples of what Collision covers:

  1. While driving into a parking spot in a parking garage, you scrape the side of the car against a cement column.
  2. You hit a car that stops in traffic in front of you.
  3. You hit a dead animal on the road.
  4. Another person hits your car and the accident is not your fault or is partially your fault.

You may look at point #4 and say shouldn’t the other person’s insurance pay for the damage if they are at fault? The answer is yes, but there are times where it is easier or faster for you to submit the claim to your insurance company and have them get the money back from the other person’s insurance company.

How does this coverage work?

In either case of Comprehensive or Collision, there is a deductible that you must choose when you buy a policy. The amount of the deductible can vary by insurance company.  Some insurance companies get creative by offering a zero dollar deductible for breakage of glass claims under Comprehensive.

For high-end sports cars or luxury vehicles, an insurance carrier may only offer a deductible based on a percentage of the actual cash value of the car.

After the deductible is paid, the amount of damage remaining is covered as long as it does not exceed the actual cash value of the car. If the cost to repair is more than the value of the car then the car is considered a “total loss.”  In that case, you would only receive the actual cash value of the car.

For cars that are over 7 years old, you should consider the premium you pay for comprehensive or collision insurance and the amount of the deductible vs the actual cash value of the car. Depending on your financial situation, it may not be worth buying coverage.

Summary

A general rule of thumb is if Collision coverage does not apply then most likely Comprehensive coverage would provide protection.


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Scott Harrigan, CIC, CRM

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