Comprehensive Car Insurance: Meaning & Coverage

The term “comprehensive insurance” may be confusing, if not unintentionally misleading.

You would assume that “comprehensive” means that your car insurance policy provides financial protection in any situation. But comprehensive applies only for certain incidents involving your car, such as the following:

• Theft and non-recovery.
• Vandalism.
• Fire.
• Damage from a tree branch or other falling object.
• Damage from severe weather, including floods, hurricanes, or hail.
• Damage caused by hitting an animal.

If your policy has comprehensive coverage and you file a claim following one of these incidents, your insurer will help pay to repair or replace your vehicle.

As you can see, comprehensive insurance does not cover damage caused by an accident with another vehicle. That would fall under collision coverage, which we’ll discuss later in this article.

How comprehensive insurance works

You can add comprehensive coverage to an existing car insurance policy. It’s a “vehicle-level” coverage, which means that if you have multiple cars on a policy, you can pick and choose which ones will be protected.

If you’re taking out a new car loan, the lender may require you to add comprehensive insurance to help protect their investment in your vehicle. Otherwise, it’s optional.

A key feature of comprehensive coverage is the deductible. Think of it as your “share” of the repair or replacement costs. The insurance company will subtract the deductible from your car’s repair or replacement costs if you file a claim. Deductibles are usually offered in increments such as $500, $1,000, or $1,500.

Here’s an example of how a deductible works.

1. You choose a comprehensive deductible of $500 when you buy your policy.
2. A tree branch above your driveway falls and damages your car.
3. You file a claim, and a body shop estimates $6,000 for the repairs.
4. Your insurance company pays $5,500 toward the repairs. You’re responsible for the final $500.

You have to make a tradeoff when choosing a deductible level. A higher deductible means you’ll pay less for your policy and more for the covered repair. If you choose a lower deductible, you'll pay more for the policy but less for the covered repair.

Comprehensive coverage limits and total loss claims

A coverage limit 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), which factors in depreciation. ACV may be much less than the market value of the car.

If your car is stolen or damaged so severely that the cost of repairs would exceed the ACV, you can expect your insurer to declare the car a “total loss.” Your claim settlement amount would be based on the ACV, minus your deductible. The insurer would take possession of the title and the car (or whatever remains of it).

Because ACV may be much less than the car's market value, you may find yourself with a settlement amount far lower than what’s needed to replace your car or pay off your current loan or lease. There are a couple of ways to avoid this situation.

Gap coverage

Gap coverage pays the difference between your total loss claim payout and the amount you owe on your loan or lease. The coverage may be available as an option on your insurance policy or offered through your lender.

New car replacement coverage

New car replacement is an optional coverage available from some insurance companies. It ensures that your total loss claim payout is enough to purchase a new car of the same or similar make and model.

Comprehensive coverage vs. collision coverage

Comprehensive and collision coverage are often purchased together. In a way, the two coverages complement one another.

Whereas comprehensive coverage pays for incidents such as vehicle theft, storm damage, or animal strike, collision applies if your car is damaged in an accident with another vehicle.

Similarly to comprehensive coverage, collision requires a deductible. The limit is based on the car’s ACV, and the insurer may declare a total loss if the cost to repair exceeds the ACV. Collision coverage may be required by your lender if you finance your vehicle, but it is not required by law.

How much does comprehensive insurance cost?

According to the National Association of Insurance Commissioners (NAIC), the average annual premium for comprehensive coverage in 2020 was $174.26. This is the most recent year for which the NAIC has premium information. State averages ranged from a low of $97.26 (California) to a high of $353.10 (South Dakota).

Of course, your cost may vary from these averages based on factors such as the year, make, and model of your vehicle; where you live; and your claims history.

Who is comprehensive insurance for?

As explained earlier, your lender may require you to purchase comprehensive coverage (along with collision coverage) if you have a loan or lease.

Otherwise, comprehensive is optional. However, you might want to consider it if having to repair or replace your car using your own resources would put you in a financial pinch. Vehicles have become more expensive in recent years due to inflation. While comprehensive coverage will add to the overall cost of your car insurance, there is peace of mind that comes with having it in place.

Where to get comprehensive insurance

Almost all major insurance companies, including USAA, offer comprehensive policies.

TIME Stamp: Comprehensive coverage preserves your investment in your car

Comprehensive insurance coverage may seem confusing, as it doesn't provide protection for every situation. But it will protect you if your car is stolen or damaged by fire, severe weather, or an animal encounter. Comprehensive coverage can help you preserve the investment you’ve made in your car and is something you should consider adding to your insurance policy.

Frequently asked questions (FAQs)

Are comprensive and full-coverage car insurance the same thing?

Comprehensive is one component of a full coverage car insurance policy. “Full coverage” typically means a policy with state-required liability coverage, plus optional comprehensive and collision coverages.

Do I need comprehensive coverage for an old car?

It depends on the car's value and your ability or desire to pay out of pocket to repair or replace it.

A classic rule has been to drop comprehensive coverage when a vehicle turns five years old or reaches 100,000 miles. But this may be outdated. Modern cars have sophisticated electronics that can drive up repair costs, and most cars are designed to last well beyond 100,000 miles. So, it might be worth keeping comprehensive as part of your policy.

How do I know when to drop comprehensive coverage?

Your insurance company won't pay more for a comprehensive claim than the vehicle’s actual cash value (ACV), which accounts for depreciation. So, if the ACV drops to a point somewhere at or slightly above your deductible, it may make sense to drop comprehensive.

Insurers use their own formulas to calculate ACV. But to get a rough idea, you can use sites such as Kelley Blue Book or NADA guides.

Does comprehensive insurance coverage cover theft?

Yes, comprehensive coverage typically pays if the vehicle is stolen and not recovered.

Do I need comprehensive coverage for every vehicle on the policy?

No. Comprehensive is a "vehicle-level" coverage. So, if your policy lists multiple vehicles, you can pick and choose which ones have comprehensive.

Can you just have comprehensive insurance?

Some insurers offer comprehensive-only policies. These are intended for those who store their vehicles for an extended period and want protection if the vehicle is stolen or damaged.

Keep in mind that you cannot drive legally with a comprehensive-only policy. Before taking a vehicle out of storage, you should add liability and any other state-required coverages.