When Is Comprehensive Auto Insurance Required?
No states require drivers to carry comprehensive auto insurance to drive legally. Comprehensive auto insurance is only required when a financial institution includes it in the automobile loan terms. Comprehensive insurance coverage helps protect the lender's investment should the vehicle be stolen and not recovered or damaged by fire or flood. Your comprehensive insurance covers the value of the car. Lenders will ask for proof of insurance before releasing loan funds. You may also be asked to provide proof of continuing coverage at any time throughout the loan term.
How Much Damage is Covered?
The amount that your insurance will pay out for covered damage depends on the coverage limit and deductible. Your deductible is the amount you must pay out of pocket before your auto insurance kicks in. For instance, if you have a $500 deductible and get into an accident that causes $2,000 worth of damage, your insurance will only pay $1,500.
Though a lower deductible will minimize your financial responsibility if your vehicle is damaged, you'll usually pay more in insurance premiums. Either way, you're spending more money, so you should consider your options carefully. If you never need the insurance coverage but pay a higher premium for a low deductible, you'll invest a lot in this coverage without realizing the benefits of it. However, if you incur serious damage, having a $500 deductible versus a $1,500 deductible can make a big difference when you're getting the vehicle repaired.
Your coverage limit is the maximum amount your insurance company will pay. Generally, the limit for comprehensive physical damage coverage is the cash value of your vehicle, accounting for its depreciation over time.
Who Needs Comprehensive Physical Damage Coverage?
Comprehensive physical damage coverage isn't required by law, so you can choose whether to include it if you own your vehicle. However, if you're financing or leasing your car, your lender may require it. If you're required to have this coverage, check with your lender to find out the specifics. You'll need to invest in the minimum amount of comprehensive physical damage coverage, but you can also increase your coverage if you'd like.
If you have a valuable car that you couldn't afford to repair or replace if it were stolen or damaged, then comprehensive physical damage coverage is a good investment. But if the value of your vehicle is on the lower end, the cost to replace it may be negligible when compared to the cost of comprehensive physical damage coverage.
You may also want to consider this type of coverage if your car is at a higher risk for damage that would be covered. For example, if you live in a wooded area, your vehicle is more likely to suffer damage from fallen trees or branches. If you frequently have to park in high-crime areas, you're more likely to experience vandalism or theft.
what comprehensive insurance covers
Comprehensive auto insurance covers repairing and replacing your vehicle due to damages caused by vandalism or theft and inclement weather conditions, such as hail or other falling objects (like a tree). Comprehensive insurance does not cover damages to your vehicle incurred in a motor vehicle accident. It also doesn't pay out for any injuries you sustain in a motor vehicle accident. Collision coverage pays for damages to your vehicle, while liability insurance covers any bodily injury or physical damage to another person's property.
How Does Comprehensive Physical Damage Coverage Work?
It can be upsetting and alarming when you experience a situation that requires comprehensive physical damage coverage. It's important to understand how this coverage works in advance so you can quickly take appropriate action to get the assistance you need in the event that your car is damaged.
For example, if you leave your apartment in the morning and find your car has been stolen from its parking spot, you need to contact your insurance company to help you pay for the loss of the vehicle. If you have a $1,000 deductible, you'll need to pay for the first $1,000 required to buy a replacement vehicle of the same value. Your insurance will then kick in and supply you with enough money to pay for the replacement up to the value of your vehicle at the time it was stolen, accounting for depreciation.
Do I need Other Types of Insurance Coverage?
Yes, you should always carry auto insurance beyond comprehensive physical damage coverage. The state of Illinois requires a minimum amount of liability coverage, which pays for damage that the other vehicle and driver sustain if you're at fault in an accident. This coverage doesn't pay for your vehicle, however. If you want your insurance to help pay for damages to your own vehicle in an accident, you'll need to carry collision coverage.
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.
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.
If you've paid for your vehicle in full, or your lending institution doesn't require you to carry comprehensive coverage, you may still want to consider adding this coverage to your auto insurance policy. There are several factors to consider when determining whether or not you should carry comprehensive auto insurance, including:
- Vehicle value: If your vehicle value is high, paying for repairs or replacing it will be more expensive if a falling object or hail damages it.
- Savings balance: Do you have enough money saved to cover any repairs or replacements of your vehicle should it be damaged by fire?
- Home address: If you live in an area with a high crime rate, you may consider adding comprehensive coverage to protect your vehicle from being vandalized or stolen.
Comprehensive coverage helps protect your vehicle investment from repair or replacement expenses associated with damages sustained outside a motor vehicle accident. Contact our experts at American Auto Insurance to determine whether comprehensive coverage is right for you.
- Theft: If your vehicle is stolen and not recovered, comprehensive coverage will pay to replace your vehicle.
- Vandalism: Comprehensive insurance pays to repair or replace damaged parts due to vandalism.
- Falling objects: If a tree falls on your vehicle, comprehensive insurance will cover the damage.
- Fire: Comprehensive insurance pays for damages to your vehicle caused by fire.
- Natural disasters: Damage from hailstorms, tornadoes, hurricanes, and other natural disasters falls under comprehensive coverage.
- Civil disturbances: Comprehensive insurance pays for destruction or damage caused by civil disturbances, such as riots.
Comprehensive coverage includes a deductible or out-of-pocket amount you agree to pay toward the damages before the insurance coverage pays out. The higher the deductible selected, the lower your annual insurance premium. A higher deductible demonstrates your commitment to safe driving. It saves your insurance company money on a potential payout, and these savings are reflected in a lower annual premium.
Your insurance policy can be rewritten at any time. When your insurance company rewrites your policy, it cancels your current policy and rewrites a similar policy for you. Your insurer will usually rewrite your policy when changing the renewal date, but they can also do so if there’s been a change that could lower your insurance premium. Insurance companies also use rewrites to adjust your deductible or change your coverage if you add or delete a vehicle.
A rewrite is similar to writing a new policy, except the underwriters can use their knowledge about the existing customer to assess the rewrite and adjust the coverage. For example, they may draw on their knowledge of payment patterns and previous claims history. Factors that could qualify you for a rewrite include:
- Combining policies, such as homeowners and auto or renters and auto.
- Traffic violations that expire from your driver's license.
- Increasing your coverage on a vehicle.
- Improving your credit score.
- Reaching a certain age, as drivers over the age of 25 often qualify for lower insurance rates.
American Auto Insurance offers low rates to Illinois drivers every day. Contact our team to see whether a rewrite is needed for your current policy.
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.
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