Do I Need Comprehensive Auto Insurance? - NerdWallet
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Do I Need Comprehensive Auto Insurance?

Damaged car from tree

Comprehensive auto insurance sounds great. After all, don’t we all want coverage that’s, well, “comprehensive”? But the insurance industry has its own way of doing things, and one of them is to offer a product called “comprehensive” that’s actually quite limited.

Comprehensive protection covers theft or possible damage to your vehicle from hazards like fire, foul weather and animals. Unless your car is an old beater with very little value, the coverage is probably worth adding.

Nearly everyone who buys comprehensive coverage should combine it with collision protection, which pays for damage from a crash involving another car or an inanimate object. However, there are a few scenarios where you might consider buying comprehensive without collision.

How to decide

Among insured drivers, 77% buy comprehensive coverage and 72% buy collision, according to an Insurance Information Institute analysis of data from the National Association of Insurance Commissioners. The analytics company ISO reports that 2.6% of people with comprehensive coverage had a claim in 2013, and the average comprehensive claim was for $1,621.

If you have borrowed money to buy the car, the lender will probably require you to have comprehensive and collision insurance, taking the decision out your hands. If you own the car outright, you should make a decision based on factors such as the value of your car, your ability to withstand a loss and hazards in your area.
Here are questions that should inform your decision:

  • How much is your car worth? If the value of your car is less than the amount of the premium plus deductible, or in the same neighborhood, the coverage won’t benefit you. For example, if your car is worth $2,400 and the deductible is $2,000, your payout would barely exceed the car’s value, and comprehensive coverage probably would not make sense. You can check car value at websites such as NADA and Kelley Blue Book.
  • How would car damage or theft hurt you financially? Could you afford to fix major damage to your car out of pocket, go without a vehicle or buy a new one? If the answer is no, comprehensive coverage is probably worth your money.
  • What are the hazards in your area? Some places have higher risks of theft, vandalism, severe weather and animal collisions. If you know you’re at higher risk, buying comprehensive coverage could make sense.

Generally, people who decide to buy comprehensive coverage also will want collision protection. But there are some reasons why you might consider buying comprehensive without collision.

The clearest case is when you have a car you don’t drive much or plan to leave parked for a while. You might want to protect against hazards like storms, fire and theft but would have little reason to worry about crashing into something.

It’s also possible to opt just for comprehensive coverage because it tends to be cheaper than comprehensive plus collision, insurer Progressive notes, although it cautions against such a decision. While you can buy comprehensive coverage without collision, insurance companies generally will not sell collision without comprehensive coverage.

How comprehensive coverage works

Comprehensive covers vehicle theft, as well as cracked windshields and damage from any of these things:

  • Hitting an animal.
  • Natural disasters and bad weather, such as tornadoes or hail.
  • Flooding.
  • Vandalism.
  • Fire.
  • Falling objects.
  • Riots and other civil disturbances.

In all cases, if your car is damaged, the insurer will pay the cost of repairs minus any deductible. For example, if you hit a deer and your repairs cost $1,500, and you have a $500 deductible, the claim payout will be $1,000.
If your car is stolen or totaled, you get paid the value of the car minus the deductible.

How much comprehensive coverage costs

Comprehensive coverage costs are tied to the deductible you choose. Generally, the higher your deductible, the lower your comprehensive premium will be.

NerdWallet looked at the cost of comprehensive coverage from the three largest insurers in California and Florida. We added comprehensive coverage to a standard auto policy for a 30-year-old driving a 2015 Toyota Camry.

We found an average comprehensive insurance cost of $117 in California with a $2,000 deductible, $157 with a $1,000 deductible and $211 with a $500 deductible. In Florida, the comprehensive insurance costs averaged $103 ($2,000 deductible), $122 ($1,000 deductible) and $143 ($500 deductible).

These prices, of course, are in addition to liability coverage, which is usually mandatory.

California comprehensive coverage costs for a 2015 Toyota Camry
State Farm
$500 deductible
$1,000 deductible
$2,000 deductible
Florida comprehensive coverage costs for a 2015 Toyota Camry
State Farm
$500 deductible
$1,000 deductible
$2,000 deductible

Methodology: NerdWallet researched rates for the three largest insurers in each state, adding comprehensive to a policy with liability injury coverage of $100,000 per person and $300,000 per accident, and $50,000 in property damage, plus personal injury protection and uninsured motorist coverage, for a 30-year-old with a clean driving record. Your rates will differ.

After you decide whether comprehensive coverage is worth it for you, keep in mind that its benefit diminishes as your car ages. Since the car’s value is always decreasing, so is your potential claims payment if the car is totaled or stolen. This means you should occasionally revisit your need for the protection and shop around for car insurance quotes.

Aubrey Cohen is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @aubreycohen.

Image via iStock.

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