Q: What is Comprehensive Coverage?

December 17, 2013 12:53 PM

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Auto insurance can include a variety of coverage areas to fit the needs of the driver. Liability coverage is the most common type of insurance purchased, covering the costs incurred on others if you're responsible for an automobile accident. Comprehensive coverage covers costs for damage received in incidents that aren't collision related.

Comprehensive coverage pays for a variety of costly non-collision events such as damage that occurs from natural disasters, falling objects, or a loss due to theft. While the law in many states requires liability insurance, comprehensive coverage is generally purchased as an add-on to an auto insurance policy that includes both liability and collision coverage. The additional coverage raises the premium. Comprehensive coverage may sometimes be required when purchasing a new car with an auto loan or when leasing a vehicle.

A secondary factor affecting the cost of the comprehensive coverage is the amount of your deductible. The way a deductible works is that both you and the insurance company pay for the cost of the repair. Your portion of the payment is the deductible amount, and the insurer covers the rest. If the cost of the repair is less than the deductible, you pay the entire repair cost yourself. The deductible is payable each time you make an insurance claim against the coverage that you have. The lower your deductible is, the higher the premium that you'll have to pay. Typical deductibles range from $200 to $1,500 and more.

Choosing the deductible amount for your vehicle is an important part of crafting a comprehensive coverage plan. When determining the deductible, you should consider the value of the vehicle, the type of damage that's most likely to occur and the amount of money that you're willing to spend on repairs. The deductible that you choose reflects the amount of risk that you're willing to take on, with lower deductibles representing an aversion to risking hefty out-of-pocket payments.

The maximum amount that a comprehensive coverage plan will pay out is the value of the vehicle. This only occurs when you're claiming payment for a totaled car, or a vehicle that has been completely destroyed. If you own an older vehicle and choose a higher deductible to keep your premium payments low, then comprehensive insurance is of less use than for someone with an expensive new car and a lower deductible.

There are some limits to the coverage that a purchaser should be aware of. Coverage usually only includes the vehicle itself. It does not cover any personal items inside the vehicle, normal wear and tear that occurs through vehicle use, or any damage or theft caused by family members or employees. Extensions can be purchased to cover employee- or family-related incidents.

Comprehensive coverage is a good addition to liability and collision insurance when driving an expensive vehicle. Damage to your vehicle can occur from a number of ways, from a minor fender bender to an air bag-popping collision -- or worse. When this happens, comprehensive coverage returns your car to operational status, getting you back on the road and driving as soon as possible.

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