In every state, drivers must maintain a minimum level of auto insurance coverage on their vehicles. Although no state requires comprehensive coverage, some lenders require borrowers to include this type of coverage on their insurance policies. Understanding what comprehensive insurance covers and how it can protect a lender’s interest can be helpful when comparing options and securing insurance coverage. When you’re paying a high premium for this type of coverage, it may also benefit you to consider a comprehensive insurance re-write.
What Is Comprehensive Auto Insurance?
The main components that can be included in an auto insurance policy are collision, comprehensive, liability, and uninsured/underinsured motorist coverage. Additional options include personal injury and medical payments protection, although they aren’t included as often as the state-required components. Liability coverage is required in most states, which includes coverage for bodily injury and property damage. Collision coverage pays for the repairs to or replacement of your vehicle when you collide with another object. It’s typically optional in most states, although a lender may require it.
Comprehensive auto insurance covers damage incurred to a vehicle that other coverage options don’t include, such as theft or vandalism. If the car sustains damage due to exposure to a heavy hailstorm or fire, this component of the insurance may cover repairs or replacement of the vehicle up to its cash value. Nearly all comprehensive components of an insurance policy include a deductible, or an amount the policyholder pays out of pocket before the insurance policy pays.
Comprehensive auto insurance doesn’t include coverage for damages caused to your vehicle in a collision, as the collision component would cover those. It also doesn’t cover any injuries you or those in your vehicle sustain during an incident. It only includes coverage for the vehicle. Your policy’s liability component covers damages and/or the cost of treatment for injuries caused to others as well, so those issues wouldn’t be covered under a comprehensive policy.
When Is Comprehensive Auto Insurance Required?
As mentioned, no states require drivers to maintain comprehensive coverage on their auto insurance policies. However, when you borrow money to buy a vehicle or enter into a lease agreement, the lender may require this type of coverage as part of the terms of the deal. Requiring this component of coverage protects the lender’s investment in case the car sustains major damage and is deemed a total loss or someone steals the car and it’s never recovered. The auto insurance policy that the borrower secures would cover the value of the car.
Minimum coverage, also known as liability coverage, wouldn’t cover the car’s value, and the borrower might stop making the monthly payments if they could no longer drive the car. A lender that requires comprehensive coverage will typically request proof of a policy that includes this component as part of the loan or lease approval process. They may also request ongoing proof that the car maintains the required coverage throughout the term.
What Does it Mean To Re-Write an Insurance Policy?
Some insurance carriers offer the option to re-write policies for their clients. An insurance re-write, also referred to as a cancel and re-write, refers to canceling and re-writing a similar policy for an auto owner. Although one of its typical purposes is to change the policy’s renewal date, it can also allow a policyholder to qualify for a lower premium or adjust the coverage components included in the plan. You might consider a policy re-write if your insurance is particularly expensive and you’ve had a change in your situation that may qualify you for a lower rate.
An auto insurance provider might also offer a policy re-write if another element of your situation has changed and you need different coverage, such as eliminating or adding a component to your policy. A re-write might also be useful if you want to adjust your deductible amount. Raising your deductible through a re-write can help you qualify for a lower monthly premium.
If a lender requires comprehensive coverage as part of the terms of the agreement to loan you funds to purchase a car, you may get a new auto insurance policy that covers the vehicle or you could request a re-write. The outcome depends on your circumstances and the policies of the insurance provider.
How Do Insurance Policy Re-Writes Work?
When an insurance provider re-writes a policy for a customer, the underwriters assess the existing policy and any information that might qualify the policyholder for an adjustment to the coverage and cost. The process is similar to what happens when a new customer applies for coverage, but the underwriters can include any knowledge they have about the existing customer, such as their payment habits and previous claims filed. They may use that information to assess whether the customer qualifies for a re-write and what factors to include when adjusting the coverage.
If you want to request a policy re-write, you might need to present compelling information about a change in your situation that would qualify you for an adjustment in your coverage and/or cost. Some of the factors that might help you qualify include:
- Reaching a certain age, as drivers over the age of 25 typically qualify for lower rates
- Combining an auto insurance policy with another policy, such as homeowner’s or renter’s insurance
- Having traffic violations fall off your record
- Increasing the coverage on a vehicle
- Improving your credit score
If any of these situations apply to you, consider requesting a policy re-write from your insurance provider. If the company isn’t willing to consider a re-write, you might want to compare rates from other providers to see what they can offer to you.
At American Auto Insurance, we provide high-quality and low-cost automotive insurance policies to drivers located throughout the state of Illinois. We serve all drivers, including those with previous violations or high-risk status, and can accommodate all types of insurance needs. Our policies can include comprehensive physical damage coverage. Request a free quote today to see how we compare with your current provider or to secure coverage so you can get out on the road.