Comprehensive and Comprehensive Coverage

Auto Insurance Basics

Comprehensive coverage will pay for damage to your car that was not caused by an auto accident. Damage caused by theft, fire, vandalism, natural disasters, or hitting a deer all qualify. Comprehensive coverage also comes with a deductible and your insurer will only pay as much as the car was worth when it was damaged.

Because insurance companies normally will not pay you more than your car’s book value, it’s helpful to have a rough idea of how much your car is worth. You can find this information at these websites: Kelley Blue Book ( or the National Automobile Dealers Association ( If you find that your car is worth less than what you’re paying for the coverage, you’re better off not purchasing this addition to your policy.

If you are at fault in an accident, collision coverage is a beneficial asset because it will cover repairs to your vehicle. Collision coverage is normally the most expensive component of auto insurance and can bring your premium costs up. You can keep your premium costs down by choosing a higher deductible, or the portion of the claim that is not covered by the insurance provider. However, keep in mind that you must pay the amount of your deductible before the insurance company’s coverage plan begins after an accident. Also, it is important to note that usually you will not be able to collect any more
than the actual cash value of your car, which is not the same as the car’s replacement cost.

Replacement cost vs. actual cash value

Replacement cost is the amount it would take to replace your vehicle or repair damages with materials of similar kind and quality, without deducting for depreciation. Depreciation is the decrease in vehicle value because of age or wear and tear.
Actual cash value (ACV) is the value of your property when it is damaged or destroyed. Claims adjusters usually figure ACV by taking the replacement cost and subtracting depreciation.

Insurance companies will often render your car “totaled” if the repair costs of the vehicle exceed a certain percentage of the car’s worth. The critical damage point varies from company to company, usually from 55 percent to 90 percent.

Another way to determine if you should purchase collision and comprehensive coverage is to ascertain how much your car is worth. Then compare how much your car is worth to the annual cost of comprehensive and collision coverage plus your deductible. If the annual cost of comprehensive and collision plus your deductible equals the value of your car, you may not want to purchase these additions to your policy but you still need to ask yourself the following question(s):

1. Can you replace the vehicle if it is totaled?
2. Do you want to pay “x” amount of dollars to insure a vehicle with “y” value?

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