Your state requires you carry at least a minimum of liability only car insurance. But what about other coverages? With so many to choose from, deciding what coverages are worth it for you situation can be overwhelming. Beyond the state minimums, we often get questions about comprehensive insurance. Do you need comprehensive car insurance? If you own an older car or have unique auto needs, holding comprehensive car insurance may not make sense for you, but in many cases, it can be a valueable part of your policy.
Below we’ll go through the differences between comprehensive and liability and why you may want to add comprehensive car insurance to your auto insurance policy. Though the information in this article should help you with your decision, the best way to determine what and how much auto insurance you need is to consult a licensed insurance agent. Our insurance advisors can provide you with expert advice on your risk and the cost of coverage. Call us today at (844) 819-2221.
What Is Liability Only Car Insurance?
Liability insurance covers the costs to another party’s person or vehicle if you are found at-fault for an accident. Liability insurance covers two types of liability: property damage liability and bodily injury liability.
Let’s say you get into an accident with another vehicle. You were “at-fault,” meaning you were the primary cause of the accident. The other person has to go to the hospital for minor injuries and their car has to go to the shop for a repair. Because you caused the accident, the other party could sue you for medical costs and car repair expenses. Even a small accident could create exorbitant medical and repair costs. Liability insurance transfers this financial burden from your wallet to your insurance provider.
Liability insurance does not cover damage to your own vehicle or person. Whether you are or aren’t at-fault in an accident, your liability insurance covers none of your own expenses. It will only cover expenses of another party for which you were liable for their damages.
Auto liability insurance is required in most states in order to protect all drivers. Choosing liabilty only car insurance means that you do not carry insurance to cover your car or your own injuries caused by an accident where you are found at-fault or by an "act of God."
What Is Comprehensive Car Insurance?
Comprehensive insurance covers against “acts of God” on the road. We get many questions asking does comprehensive insurance cover theft, and the answer is yes. It covers all your personal repairs or replacements against covered events that can include natural disasters, theft, vandalism, fire, falling objects, and more. Learn about comprehensive insurance here.
Comprehensive insurance is also often paired with collision insurance, which will cover your own car’s damage if you are in an accident (with another car or with an object). Learn more about collision insurance here.
Comprehensive insurance often also includes liability insurance. This means total comprehensive coverage will usually cover:
- Medical costs for other party if you are found at-fault
- Property damage costs for other party if you are found at-fault
- Theft of car
- Damage to your car in auto accident
- Damage to your car in a collision with object
- Damage to car caused by “acts of God,” like storms, falling debris, or flooding
Some comprehensive car insurance policies also cover your own medical bills, although this is often covered under health insurance.
Do You Need Comprehensive Insurance?
You need liability insurance to protect yourself and other drivers (and to satisfy your state's minimum coverage laws). But do you need the coverage comprehensive entails?
When You Need Comprehensive
You should consider comprehensive insurance if:
1.) You have a loan or lease on your car. Most lenders will require that you carry comprehensive coverage on a car that you haven’t paid off.
2.) You live in an area with high incidence of theft, vandalism or severe weather.
3). You wouldn’t be able to afford to replace your car if it was stolen or totaled.
4.) You insure a driver under age 25.
When You Don’t Need Comprehensive
You may not need comprehensive insurance if you don’t meet the above criteria and your owned car does not have a high value. Remember that your comprehensive insurance is based on the value of your car. If your car’s value is low, your insurance payout in a claim to replace that car will likely also be low. The payout, in fact, could be lower than the premiums you would pay for comprehensive insurance.
The general rule of thumb: Drop or reduce comprehensive coverage if your annual premium for comprehensive insurance exceeds 25% of the car’s current value.
Consider how much you would be paid if your car were totaled. Compare that with your comprehensive monthly premiums. How many months or years would it take for you to “make up” the difference? For example, your car is currently worth $10,000. You are paying $100 per month in auto insurance. It would take just over 8 years to make up the difference. This is a good chunk of time (especially since most cars average a 10 year lifespan.) In this case, you likely want to hold on to your comprehensive coverage.
However, if your car is currently worth $1,000 and you pay $100 per month in comprehensive insurance, you are paying more in premiums in just one year than you would in the case of an insurance claim payout. In this case, the insurance premiums might not be worth it. Plus, comprehensive insurance claims usually have a deductible as well. This means you would have to pay a part of the cost out of pocket before your insurance payout starts.
Some people also choose to forgo comprehensive coverage if they have a large enough emergency fund. If your savings account is large enough to replace the cost of your car, you could potentially forgo comprehensive coverage to minimize your insurance premiums. This is a high-risk option, but it can help minimize monthly costs for those with financial security.
Despite these unique situations, we almost always recommend you hold comprehensive insurance. This is the most protective and least risky option in case something serious were to happen to your car.
When determining whether you need comprehensive and collision or only liability, consider two key questions:
- How much is your car worth?
- How risk averse are you?
If your car has low worth, you may end up paying more in premiums than you would in a claim payout. Those with high-risk tolerance and a padded savings account may also choose to minimize insurance costs by reducing comprehensive coverage.
Ultimately, though, comprehensive can be a valuable addition to your auto insurance policy.
Contact an InsuraMatch insurance advisor today at (844) 819-2221 to review your auto insurance coverage and compare quotes to find a better rate.
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