Written byComprehensive car insurance is the broadest level of motor cover, paying for damage to your own car as well as damage you cause to other people's property.
Also known as: comprehensive cover, full comprehensive insurance, comprehensive motor insurance
Key points
- It generally covers accident damage, theft, fire, storm and vandalism, plus damage you cause to other vehicles and property.
- Cover is not unlimited: the product disclosure statement lists exclusions such as unlicensed driving or driving over the limit.
- You choose an excess. A higher excess usually lowers the premium but means paying more when you claim.
- Agreed value fixes the payout if the car is a write-off; market value pays what it is worth on the day.
- Finance a car and the lender will normally require comprehensive cover, because the vehicle is its security.
What comprehensive car insurance covers
Comprehensive sits at the top of the motor insurance ladder. It pays to repair or replace your own car after a collision, whoever was at fault, and covers theft, fire, hail, storm and malicious damage. It also includes the third party liability that a basic policy provides, so damage you do to someone else's car or fence is picked up too.
Most policies add extras such as a hire car after a not at fault accident, towing, emergency repairs and cover for a child seat. What is included, what is optional and what is capped varies a lot between insurers, so read the product disclosure statement rather than the brochure. One thing it does not cover is injury to people. That sits with compulsory third party insurance, which you need to register a vehicle and which comes with registration in most states, as a separate green slip in New South Wales.
Comprehensive cover and car finance
If you borrow to buy a car, the financier has an interest in the vehicle staying repairable and insured. Most contracts require comprehensive cover for the life of the loan, and some ask to be noted on the policy so a total loss payout goes to them first.
That applies whether the car is financed personally, under a novated lease, or by a business under a chattel mortgage. If the payout is less than the balance owing, the shortfall is still yours to pay, which is why some borrowers add gap cover. Check the finance contract for what it requires.
Example
A courier in Melbourne finances a two year old van. Her lender requires comprehensive cover, so she takes an agreed value policy set close to what she paid. Eighteen months later a driver runs a red light and writes the van off. The insurer pays the agreed value, which clears the finance balance and leaves a little toward the next van. Because the accident was not her fault and the other driver was identified, her insurer usually waives the excess, and the hire car benefit keeps her deliveries running while the claim is settled.
Not to be confused with
- Write-off
- a write-off is a claim outcome, not a type of cover
- Residual value insurance
- residual value insurance protects a financier's end of term value, not your car against damage
Frequently asked questions
What does comprehensive car insurance cover?
Damage to your own car from a collision, theft, fire, storm, hail and vandalism, plus damage you cause to other people's vehicles and property. Most policies also include towing, emergency repairs and a hire car after a not at fault accident. Limits and exclusions are set out in the policy documents.
Is comprehensive car insurance worth it?
It usually comes down to whether you could afford to replace the car tomorrow. For a newer or financed vehicle, comprehensive is the practical choice and often a contract requirement. For an older car worth little, some drivers weigh the premium against the likely payout and choose third party instead.
What is not covered by comprehensive car insurance?
Common exclusions are driving while unlicensed or over the alcohol limit, using the car for hire or ride share without the right cover, wear and tear, mechanical failure, and damage caused deliberately. Unlisted drivers may attract a larger excess. The product disclosure statement is the place to check.
Does comprehensive insurance cover theft?
Yes. If the car is stolen and not recovered, the insurer pays the agreed or market value less any excess. Theft of items left inside the car is treated differently and is often capped at a small amount, or covered by your home contents policy instead.
Do I need comprehensive insurance for a car loan?
Almost always. Lenders and lessors normally require comprehensive cover for the full term because the car is their security. Some contracts also require the financier to be noted on the policy. Letting cover lapse can be a breach of the loan contract, so keep the renewal in your diary.
Related terms
Broader term: Insurance
Insurance
Insurance is a contract where you pay a premium and an insurer covers specified losses, such as damage to a financed asset or a lender's loss on default.
Read definitionCar loan
A car loan is a credit contract used to buy a vehicle: the lender provides the funds and you repay them over time with interest.
Read definitionWrite-off
A write-off is an accounting entry that removes an asset or unpaid customer invoice from the books because it no longer has recoverable value, recording the loss against profit.
Read definitionSecurity (collateral)
Security (collateral) is an asset or legal interest a borrower grants a lender, which the lender can take and sell to recover the debt if the borrower defaults.
Read definitionProduct disclosure statement (PDS)
A product disclosure statement (PDS) is the document a product issuer must give a retail customer before they buy a financial product, setting out its features, risks, fees and costs.
Read definitionNovated lease
A novated lease is a three-way car lease where your employer takes over the lease payments and deducts them from your salary, mostly before tax, while you work there.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.