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What does comprehensive auto insurance cover?

Let's hope the driver of this car has comprehensive coverage. Otherwise he's out of luck. See more car safety pictures.
iStockphoto/Thinkstock

A person can insure just about anything these days: rental property, a flight to Mexico, Kiss frontman Gene Simmons' tongue [sources: Folger, Investopedia]. You can even take out a policy on Fido the golden retriever if so inclined.

For car owners (and leasers), collision insurance is arguably the most important kind of coverage and in many states is required by law. This coverage, however, is limited to physical injuries and damage caused as the result of an accident. Anyone who has parked a car on a city street, in a flood zone or within range of egg-flinging teenagers likely knows that there are many other ways a car can be damaged. That's where comprehensive auto insurance comes in.

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Comprehensive auto insurance covers damage caused by incidents other than a car accident, including theft, fire, vandalism, weather, falling objects and animal damage. It isn't required by law, but it may be a good idea depending on the value of the car you're driving. In fact, drivers of leased or financed cars are often required to obtain this insurance in order to protect the car owner or lender's investment. Although separate from collision insurance, a driver must typically have collision insurance in order to be able to purchase comprehensive coverage [sources: Allstate, Maine Bureau of Insurance].

The cost of comprehensive coverage depends largely on the deductible amount, which commonly ranges from $250 to $1,000. A higher deductible means that the driver will have to cover more of any damages before the insurance coverage kicks in, but also lowers the overall premium. Increasing the deductible from $200 to $500, for instance, can reduce premiums by 15 to 30 percent [source: Kiplinger]. Of course, a person who opts for a higher deductible will want to be sure that he or she can pay it in the event that the car is damaged and should weigh upfront premium savings against a higher deductible on the back end.

The type of car insured can also affect the comprehensive coverage rate: a make or model that has a high number of claims or high repair costs will result in a higher premium. A vehicle with safety features like an authorized anti-theft protection, however, may be eligible for a discount [source: Kiplinger].

So is comprehensive auto insurance right for you? Read on for important information that can help you decide.

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The first thing to do when considering comprehensive auto insurance - or any other type of insurance for that matter - is read the fine print. Some policies don't cover certain kinds of damage, such as damage to GPS navigation or satellite radio systems that aren't permanently installed in the car, while others cap the amount of coverage for these items [source: Maine Bureau of Insurance].

A driver should also consider whether the car is likely to be exposed to hazardous conditions. A car parked on a busy city street, for example, is probably more likely to be damaged or stolen than one that is parked in a secure garage and, as a result, likely subject to a higher comprehensive insurance rate [source: Cadet].

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Ultimately, the car's value is the most important factor in determining whether comprehensive coverage is a good idea. In the event that a covered car is damaged, the most that this coverage will pay out is the cash value of the car at the time it was damaged, less the deductible amount. For a car that's not worth much - perhaps because it's old or banged up - the payout may be less than or equal to the cost of the insurance [source: Allstate].

Consider for example a car worth $1,000 at the time that it is mauled by a cougar that escaped from the local zoo (or, more likely, stolen or damaged by a falling tree branch). If the owner has comprehensive insurance with a $500 deductible, the most the coverage will pay is $500. With comprehensive rates averaging about $113 a year, a driver who's paid for the coverage for four or five years may get a payout close to what the driver has already paid in premiums. One common rule of thumb is that the annual cost of comprehensive auto coverage should be less than 10 percent of the vehicle's cash value [source: Consumer Reports].

In other words, the purpose of comprehensive auto insurance is to protect the value of the car from non-accident damage. If the value is already low, it may not be worth protecting.

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When I lived in Atlanta, it wasn't out of the ordinary to hear ambulances and fire trucks rumble by my apartment complex, sirens blaring. The road adjacent to my apartment complex connects the downtown and college areas to a major hospital. It was unusual, however, for medical and fire personnel to stop their big rigs right outside my window in the middle of the night. So when I realized one night that the fire engine whose siren penetrated the walls of my apartment like they were papier mâché was not moving, but rather parked alongside my apartment complex, I figured I should see what was going on. When I left the apartment and descended three flights of stairs to the outdoor parking lot, I realized that I was trapped. A heavy rain had flooded the entire lot and the water was rising into the living rooms of first floor units. Twenty-five or so cars had also been swept up in the flood and were floating around the lot like unmanned bumper cars. One of them was my relatively new Honda Civic. It's a good thing that I had comprehensive auto insurance.

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Sources

  • Allstate. "Comprehensive Coverage: To Help Take Care of 'Non-Accident' Costs." (March 24, 2012) http://www.allstate.com/auto-insurance/comprehensive-coverage.aspx
  • Cadet, Tim. "How to choose the right car insurance." Feb. 17, 2012 (March 24, 2012) http://www.chicagotribune.com/classified/automotive/used/chi-car-insurance-choice-20120217,0,731240.story
  • Consumer Reports. "A guide to car insurance." Feb. 2011 (March 24, 2012) http://www.consumerreports.org/cro/cars/car-buying-advice/guide-to-new-car-buying/after-the-sale/guide-to-insurance/index.htm
  • Folger, Jean. "Weird insurance policies." Investopedia. Sep. 23, 2011 (March 24, 2012) http://money.ca.msn.com/insurance/weird-insurance-policies
  • Investopedia. "Weird celebrity insurance policies." (March 24, 2012) http://money.msn.com/insurance/weird-celebrity-insurance-policies
  • Kiplinger. "Reshop Your Insurance in 2012." March 7, 2012 (March 24, 2012) http://community.nasdaq.com/News/2012-03/reshop-your-insurance-in-2012.aspx?storyid=125597#ixzz1p6wq5RsbAs
  • Maine Bureau of Insurance. "A Consumer's Guide to Personal Auto Insurance." Feb. 23, 2012 (March 24, 2012) http://www.maine.gov/pfr/insurance/consumer/auto.htm

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