Auto insurance policies offer the public consumer protection and the policyholder their own asset protection. While state requirements are minimal, the coverage limits that you must carry are generally high enough to help you pay for the third-party damages that could be incurred in a minor accident. Unfortunately, carrying what’s required by the state doesn’t protect your car.
If you want protection for your own property, you must buy physical damage coverage for an added premium. One type of physical damage coverage that’s available for most vehicles is comprehensive. Comprehensive pays for your own cars and not others. Here’s what you need to know when you’re shopping for coverage.
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What does auto liability insurance cover?
Liability is a third-party coverage that pays for damages that are incurred by others. You must be declared the at-fault driver in a loss in most states before your Bodily Injury and Property Damage coverage will pay for medical bills and repair bills.
Most states only have legislation that requires a driver to purchase and maintain liability coverage.
While there are a few states that require Uninsured Motorist or Personal Injury Protection, which both pay first-party benefits, no state in the U.S. will require a vehicle owner to purchase insurance protection for that vehicle.
What is physical damage coverage?
Physical damage coverage is defined as auto insurance coverage that insures a covered auto on the policy against damage. Under this category, there are two different types of coverage that you can carry. These include comprehensive and collision, which each covers different kinds of perils.
What kind of perils does comprehensive coverage protect against?
Comprehensive goes by several different names. You might hear it being called things like comp, “Other Than Collision” (OTC), parked car insurance, or storage insurance. Regardless of what it’s called, comprehensive always covers against the same types of physical damage losses.
In a broad sense, comprehensive coverage will pay for damages that are caused by incidents other than a car accident. While it’s not required by law, it might be required by your lender or lessor if the vehicle is being financed or leased. Here’s a full list of the perils that’s covered under the standard policy:
- Fire or explosion
- Theft or vandalism
- Falling objects
- Hail and other weather-related perils
- Damage caused by a live animal
- Glass breakage
How does comprehensive differ from collision insurance?
If you’re confused by terms like comprehensive and collision being used separately, it’s important to gain an understanding of how these coverages differ. While they are both physical damage coverage options that cover your car and are required by lenders, they protect you in very different situations.
Collision is a first-party benefit that’s usually used when you’re at-fault in an accident. It only pays when your vehicle collides with another vehicle or some other type of real property. In some events, collision will pay when the other party doesn’t have insurance or the other insurer is delaying the claim. Here are the key differences between comprehensive and collision:
- Collision typically has higher premiums and will require a higher deductible than comprehensive
- You must purchase comprehensive to carry collision
- You can buy a comprehensive-only policy on a stored car or a basic policy that includes comprehensive without buying collision
- Your driving record and claims record have a bigger impact on your collision premiums than your comprehensive premiums
What is a comprehensive deductible?
When you file a claim for damages after a peril that’s listed under comprehensive you must satisfy your deductible. A deductible is the portion of the damages that you’re required to pay when you’re filing any type of damage claim for your own car. It’s a lot like the deductible on a health insurance plan.
If you suffer minimal damage or have a high deductible, you don’t need to file a claim because the insurer won’t pay.
It’s so important to know the role of your deductible before you choose it. If you do have a claim and it exceeds your deductible, the amount will be deducted from your check. You can pay the repair shop directly or the insurer.
Will a deductible ever be waived?
You almost always have to pay a deductible when you’re filing a claim. For a comprehensive claim, however, there are a few unique circumstances where your deductible might be waived.
When you file a claim for a cracked windshield, and the windshield can be repaired rather than replaced. Check with your insurer to see how the handle this type of claim.
Is there a limit to how much my auto insurance company will pay?
If you look on your declarations page, you will see that your policy will pay up to your vehicle’s Actual Cash Value for any comprehensive claim. While there’s not a stated limit, there’s still a very strict limit that all claims adjusters stick to when processing a claim.
Actual Cash Values can vary based on your car’s condition, age, model, trim level, mileage, and other details. Since the value can change, the insurer doesn’t put a stated limit on your declaration’s page.
Instead, the insurer will calculate the value of the car at the time of the loss. This value can be negotiable if you aren’t happy with it.
What happens if my damages cost more than my car’s value?
If you file a claim and it turns out that it costs more to repair your car than it’s worth, the claim will go from a repair claim to a total loss claim. The company will only pay up to your car’s ACV minus your deductible when settling the claim. You do have the option to keep the car but its salvage value will be deducted from your payment.
You should take a look at comprehensive coverage if you can’t afford to replace your car on your own. The premiums for comprehensive coverage are affordable.
Use an online rate comparison tool so that you can see how much premiums cost from carrier to carrier. Enter your zip code in our FREE comparison tool to get started!