Oct 27, 2011

Understanding what you pay for with Comprehensive Auto Insurance

Comprehensive auto insurance - it is something most drivers have no choice but to carry, but something many of us do not really understand.  Honestly, it is something most of us have not taken the time to understand, often because we do have little to no choice but to carry it.  However, if you take the time to understand what comprehensive car insurance is and what the options with it are, you can not only feel better about paying for it, but you might also find ways to reduce the expense.
What is Comprehensive Insurance Coverage?

Comprehensive insurance coverage is not exactly what it might sound like it is.  When people hear the word “comprehensive,” they often think that means complete or total coverage - and comprehensive auto insurance is far from that.

Comprehensive auto insurance is actually coverage only for a portion of physical damage done to a vehicle.  Comprehensive insurance (also referred to commonly as “comp” or “other than collision” or “OTC”) is one type of insurance that covers physical damages to a car. There are two main types: comprehensive and collision.

Collision coverage covers just what it sounds like it should: physical damages to a vehicle that result from an accident or collision, like a crash, collision with another vehicle, hitting a tree or telephone pole, or flip over. 

All other types of physical damage, including “acts of God” and hitting an animal, fall under comprehensive insurance coverage. Basically, if the damage did not occur as a qualified accident, it is only covered if you have comprehensive insurance coverage. The types of damages that are most commonly covered under comprehensive coverage include:

* Fires
* Vandalism
* Broken glass (as long as glass is a component of your comp policy - be sure to find out)
* Damages from storms or natural disasters (hail damage, wind damage, damage from a falling tree, etc.)
* Theft

As you can see there is actually a lot covered by comprehensive insurance that you might have assumed was covered under other portions of your policy.  This is especially true in the perceived “gray areas” like when a driver strikes an animal crossing the road, like a deer.  Many drivers might think of this a collision, but your insurance company will not, and if you only carry collision or liability insurance, you will not be covered for such an event.

Making Smart Financial Decisions Regarding Comp Coverage

Now that you have a better understanding of what comp insurance is and you might be wondering if you have to carry it, or if there are ways to save money with more or less.  This will depend entirely on your situation and the ownership and financing of your vehicle.

If you, like most people, have financed your vehicle, you pretty much can depend on having to carry comp insurance in addition to collision and liability, because the bank will want that vehicle and their investment protected for its full value in the event of any type of damage.

If you own your car outright you will have more flexibility and more options, and this is where you really need to determine your vehicle’s value, your policy deductible choices, and weigh the cost of insurance and deductibles against what you would actually see back in the case of a claim.  Dropping comp coverage just to save on your monthly bills may not be a smart idea, but if there is little value to your vehicle it could also be a good decision. 

To make the smart choice, you really need to know a few things like the level and limit of your coverage, the savings if you dropped it, what you would lose and be uncovered for, and the value of your vehicle and return on your premium investment if you need to make a claim.  Some time spent online or a discussion with one or more insurance agents will help you make these decisions. Now that you know precisely what you can and cannot expect from this portion of your auto insurance, you will be well-positioned to make those determinations.

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