Comprehensive insurance is a term applied to an insurance policy that provides a broad amount of protection. Most people though associate the term comprehensive insurance with a specific coverage provided under the automobile insurance policy. If you own a newer or a more expensive vehicle, you may benefit from purchasing comprehensive insurance.
Significance
Comprehensive insurance, also known as other than collision coverage, provides protection against unpredictable occurrences that are not covered by liability or collision insurance. When comprehensive insurance is purchased, the insurance company will pay the cost to repair or replace the vehicle minus your deductible if a covered loss occurs. Comprehensive insurance claims are settled on an actual cash value basis, meaning in the event of a total loss, the insurance company will pay the replacement cost of the vehicle minus depreciation.
Covered Losses
Comprehensive insurance provides coverage for losses caused by fire, theft and vandalism. Storm damage, falling objects, flood, striking an animal and glass breakage are also covered perils under the comprehensive portion of an automobile insurance policy.
Deductible
Comprehensive claims are subject to a deductible. The deductible is the amount you must pay out of pocket before the insurance company will settle a claim. Most automobile insurance policies have a comprehensive deductible ranging from $0 to $1,000. The lower the deductible the higher the premium but the less you will have to pay out of pocket in the event of a covered loss. Because comprehensive insurance covers glass breakage, such as a cracked windshield, many buyers usually choose a lower comprehensive deductible.
Legal Requirements
Unlike liability insurance, comprehensive insurance is not regulated or required by the state. If you are making payments on your vehicle to a bank or lien holder though, they may require your carry comprehensive and collision coverage to protect their investment until your loan is paid off.
Benefits
Comprehensive insurance is used to repair or replace a vehicle damaged in a covered loss. Instead of paying the entire amount out of pocket, you are only subject to a deductible. Comprehensive insurance is also used to cover vehicles that are in storage. Vehicles in storage are not likely to be on the road or involved in a collision but may sustain damage due to fire, theft or other covered perils.
Considerations
Comprehensive insurance is usually sold as a package with collision insurance. Though you can purchase comprehensive insurance without purchasing collision insurance, you cannot purchase collision insurance without comprehensive insurance.
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