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What Is Comprehensive Insurance?

Car insurance is about more than just making sure you’re covered if you get in a collision. Because the truth is, your car can get damaged in all kinds of other ways. Heck, it can get damaged when you’re not even driving it!

That’s what comprehensive insurance is for. It protects your car from all kinds of disasters—like fallen trees, wildfires or wildlife. (Seriously, why do deer run toward traffic?). So let’s talk about exactly what comprehensive insurance is, how it works and if you need it. (Spoiler alert: You do!)

What Does Comprehensive Insurance Cover?

Comprehensive insurance is, well, comprehensive. It covers almost any random automotive tragedy you can imagine—natural disasters, man-made mayhem and everything in between. Here are some of the most common ones:

  • Animal collisions (like hitting an elk on your road trip to Yellowstone)
  • Weather (think hurricanes, tornadoes, flash floods, hailstorms, lightning strikes and wind damage)
  • Earthquakes and landslides (we feel for you, California)
  • Fire and explosions (whether that’s a garage fire, engine fire or something much bigger)
  • Theft, vandalism and riots (we hate having to include this one, but at least your car will be covered if one of these scary things happens to you)
  • Debris from other cars (like that truck stacked with junk you just know is going to fall off when you try to pass it)
  • Damage from falling objects (such as a tree limb or debris from an overpass or construction site)
  • Chipped or cracked glass (nothing’s worse than getting a chip in the windshield right at eye level!)

Basically, comprehensive insurance covers the cost to repair or replace your car if something really unlucky happens to it.

How Does Comprehensive Insurance Work?

When you buy a comprehensive insurance policy, you’ll first choose a comprehensive deductible. That’s the amount of money you’ll pay out of pocket if your car gets damaged in an event the policy covers.

Do you have the right auto insurance coverage? You could be saving hundreds!

After you pay the deductible, the insurance company will pay up to the policy limit. The policy limit is usually the amount the car is currently worth—not what you originally paid for it. (Sorry, but them’s the rules.)

Let’s look at some examples to see how that works.

Staying Under the Policy Limit

Anna’s car is worth $7,000. She hits a deer and causes $1,500 of damage to her car. The cost of repairs is less than the car’s total value, so the insurance company will actually pay less than the policy limit. In this case, Anna pays her $500 deductible, and the insurance company pays the other $1,000.

Reaching the Policy Limit

Christy’s car is worth $10,000. One morning, she tries to leave for work. But her car’s been stolen. She has a $1,000 comprehensive deductible, so the insurance company writes her a check for $9,000—the value of the car minus the deductible.

Passing the Policy Limit

Jeff’s car is worth $3,000. He’s driving home, and a ladder falls off the construction truck in front of him. He hits the ladder, doing serious damage under his car. Repair bill: $3,500. Jeff pays his $1,000 deductible. The insurance company pays $2,000—up to the policy limit. Since Jeff wants to fix his car, he has to come up with the remaining $500 himself. (This situation is rare, but it is possible to do more damage than your car is worth.)

In each case, comprehensive insurance saved that person a lot of money. So hopefully you’re starting to see why it’s so important!

Choosing a Comprehensive Deductible

Now you might be thinking, I want a low deductible like Anna, so I don’t have to pay as much. After all, isn’t it better to pay $500 than $1,000?

Well, not always.

When your deductible is low, the car insurance company is more likely to lose money helping you pay for repairs. To offset that risk, they charge higher premiums. You’ll pay more for coverage—and the longer you go without filing a claim, the more money the insurance company makes from your premiums.

On the other hand, a high deductible may sound bad, because you have to pay more up front if something happens. But you’ll actually pay lower monthly premiums—so the longer you go without filing a claim, the more you save.

And don’t forget about your emergency fund! If you’re done with Baby Step 1, you can choose a $1,000 deductible, because that’s how much you have saved for emergencies. And if you’re on Baby Step 3 with a fully funded emergency fund, you can go for an even higher deductible and lower premiums! Choosing high deductibles with low premiums is one of the best ways to save money on insurance.

Comprehensive vs. Collision vs. Liability Coverage

There are several types of car insurance, and it’s easy to mix them up. So let’s compare the three main types and find out where comprehensive insurance fits in.

  • Liability: Pays to cover medical costs and damages for the person whose car or property you hit during a collision. Unless you live in New Hampshire, you’re required to carry your state’s minimum amount of liability insurance.1
  • Collision: Pays to repair or replace your car if it’s damaged in an accident with another vehicle or a stationary object, like a fence or a guardrail
  • Comprehensive: Pays to repair or replace your car if it’s stolen or damaged in a natural disaster, in a collision with an animal or road debris, or by another person

When you have all three of these types of insurance, then you have full coverage. Full coverage insurance can get expensive, but if you can get a good rate, it’s worth the extra few dollars to have peace of mind knowing your car is protected from all kinds of disasters.

Do I Need Comprehensive Coverage?

Yes! Auto accidents happen—and they don’t always involve another car. Comprehensive insurance protects you financially when these other types of accidents happen. Instead of paying all the costs to repair or replace your car, you’ll get help from the insurance company. So you can keep your emergency fund in the bank for another rainy day.

Comprehensive coverage is especially important if you live in an area where natural disasters are common—like wildfires in California, hurricanes in Florida or tornadoes in Oklahoma—or if you live in a big city where other people are likely to be careless and damage your car (hello, Chicago). And it’s definitely important if you’re in Baby Step 1 or Baby Step 2, when you don’t have enough cash laying around to replace your car.

Now, we’re going to throw in one little monkey wrench here: Some insurance companies won’t give you comprehensive insurance if your car is too old or if it’s worth less than their lowest deductible. Remember, insurance pays for repairs up to the car’s current value. If your car is only worth $1,000, there’s no point having a $1,000 comprehensive deductible—even if your car got totaled, the insurance company wouldn’t pay a dime!

So if you’re driving a hoopty to get through Baby Step 2, you get a pass on this . . . for now. The second you get a car that’s worth a little more, get comprehensive insurance to go with it! And if you’ve already got a car that qualifies, you need comprehensive coverage ASAP. (That’s as soon as possible, in case you missed it.)

Find the Best Comprehensive Insurance Policy

Comprehensive car insurance is a necessity, but that doesn’t mean you have to pay an arm and a leg for it (or a lung and a kidney, if your insurance company sucks). It can actually be downright affordable! With our trusted network of Endorsed Local Providers (ELPs), you can find an independent insurance agent in your area to get the best deals on comprehensive coverage.

Connect with an ELP today to make sure you’re covered and find out how you can save on your car insurance.

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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