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How Comprehensive Car Insurance Works in California

Almost every driver is familiar with liability insurance (it’s the kind you’re legally required to carry), and many drivers have heard of collision insurance, too (it covers damage to your car when you’re at fault for an accident with another vehicle). But very few drivers have heard of comprehensive insurance or understand how it can further protect their car.

What Is Comprehensive Insurance?

Comprehensive insurance covers the costs of repairs to your car when it’s involved in something other than a collision with another vehicle. Unlike liability insurance coverage, you can make a comprehensive insurance claim regardless of whether you are at fault for the accident.

Typically, comprehensive insurance covers repairs to your car when:

Is Comprehensive Insurance Required in California?

In California, only liability insurance coverage is legally required. However, suppose you’re leasing a car or financed the purchase of a new vehicle. In that case, the leasing company or lender may require you to maintain comprehensive insurance coverage and additional insurance policies until the lease period is over or until you’ve paid off the car loan. Before you sign the lease or loan agreement, make sure you read through everything and understand exactly what kind of insurance coverage you need.

Comprehensive Insurance Coverage in California: Some Basic Terms

Deductible

This is the amount of money you’re willing to pay before the comprehensive insurance company starts covering the costs to repair your car. A lower deductible means there’s a higher chance that the comprehensive insurance company will help cover the costs to fix your ride, but it also means you’ll pay a higher premium.

Policy Limit

This is the maximum amount of money that the comprehensive insurance company will pay to cover damage to your car, minus the deductible. For example, if you have a policy limit of $5,000 and a deductible of $1,000, then the comprehensive insurance company will pay up to $4,000 to repair your car.

In most cases, comprehensive insurance companies calculate your car’s market value based on what kind of car you have, how old it is, and your vehicle’s condition. This is the maximum policy limit the insurance company will offer you. You can always decide to buy a policy with a lower policy limit. This will help decrease your premium, but it also means you might be on the hook for repair costs if your car is involved in a major accident.

If you’re involved in an accident where the cost of repairs is more than the value of the car, then the vehicle is considered “totaled.” In that case, the insurance company will send you a check equal to the policy limit minus your deductible.

Premium

The premium is the final price of the policy. You pay the premium whether or not your car is involved in an accident.

Remember that a higher deductible and a lower policy limit mean a lower premium.

What Comprehensive Insurance in California Doesn’t Cover

Comprehensive insurance protects your car only when it’s involved in an accident other than a collision with another vehicle or object while you are driving. Comprehensive insurance does not cover your car in these situations:

  • Damage to other vehicles in an accident — this is covered by your liability insurance
  • Damage to your car when you collide with another car, and you’re at fault
  • You collide with an object such as a tree or post while driving your car

To protect you in these situations, it’s a good idea to considering getting a collision insurance policy or increasing your liability insurance coverage beyond the legal minimum coverage in California.

How Insurance Companies in California Determine the Value of Your Car

Actual Cash Value

In California, the actual cash value (ACV) can be considered the car’s market value before the damage occurred. ACV is based on factors such as the age of the vehicle, mileage, and amount of wear and tear on the car.

Salvage Value

The car’s salvage value would be the value of the vehicle if it were to sell in its current unrepaired condition. In almost all situations, your ride has a salvage value because even a completely destroyed car might be worth $50 or $100 in scrap metal.

Total Loss

Car insurance companies in California use a special formula to determine whether your car is worth repairing:

Repair Cost + Salvage Value ≥ Actual Cash Value

In other words, if the cost to repair the car plus the salvage value is greater than the ACV of the vehicle, then the insurance will consider the vehicle a “total loss” (also known as “totaled”). When this happens, the insurance company will have the vehicle salvaged and send you a check for either the ACV of the car or your policy maximum (minus the deductible), whichever is less.

In some situations, you may not want the car insurance to take your car to be salvaged. Perhaps you can do the repairs yourself, or perhaps you want to keep the vehicle for personal reasons. In this case, you can essentially “buy back” your damaged car from the insurance company for its salvage value.

Examples of How Comprehensive Insurance Works in California

family riding in car with comprehensive insurance in california

Exactly how your comprehensive insurance works depends on the circumstances of the incident, the costs of the repairs, and the ACV (current market value) of your car. Here are a few example situations:

Example 1: Vandalism

Jerry wakes up one morning to find that someone has keyed his new car, slashed the tires, and stolen the hubcaps. The total repair and replacement costs amount to $2,300. Luckily, Jerry has a comprehensive insurance policy with a deductible of $1,000 and a maximum limit of $10,000.

How Jerry’s Comprehensive Insurance Coverage Works:

  1. Jerry needs to pay for the first $1,000 of the repair costs (his deductible).
  2. There is still $1,200 to pay for the car repairs.
  3. The comprehensive insurance company covers the remaining $1,300.
  4. In total, Jerry pays $1,000, and the comprehensive insurance company pays $1,300.

Example 2: Natural Disaster

Miriam’s car is severely damaged in a hailstorm. Her car is worth $10,000. The total repair and replacement costs amount to $1,500, and the insurance company determines the salvage value of the vehicle is $8,000. Luckily, Miriam has a comprehensive insurance policy with a deductible of $500 and a maximum limit of $10,000.

How Miriam’s Comprehensive Insurance Coverage Works:

  1. The salvage value ($8,000) plus the cost of repairs ($1,500) is less than the ACV of the car ($10,000). Therefore, the insurance company agrees to cover the repair costs.
  2. Miriam needs to pay for the first $500 of the repair costs (her deductible).
  3. There is still $1,000 to pay for the car repairs.
  4. The comprehensive insurance company covers the remaining $1,000.
  5. In total, Miriam pays $500, and the comprehensive insurance company pays $1,000.

Example 3: Theft

Mike wakes up one morning to find that someone has stolen his brand-new car worth $20,000. The vehicle is never recovered. Luckily, Mike has a comprehensive insurance policy with a deductible of $1,000 and a maximum limit of $15,000.

How Mike’s Comprehensive Insurance Coverage Works:

  1. The comprehensive insurance company will send Mike a check for $14,000 ($15,000 policy limit minus the $1,000 deductible).

Example 4: A Total Loss

Will hits a deer while driving his car, which is worth $3,000. The repair costs for his car are $2,000, and the vehicle’s salvage value is $1,300. Luckily, Will has a comprehensive insurance policy with a deductible of $500 and a maximum limit of $3,000.

How Will’s Comprehensive Insurance Coverage Works:

  1. The salvage value ($1,300) plus the cost of repairs ($2,000) is more than the ACV of the car ($3,000). Therefore, the comprehensive insurance company determines the car to be a total loss.
  2. The insurance company takes Will’s car to be salvaged.
  3. The comprehensive insurance company will send Will a check for $2,500 ($3,000 policy limit minus the $500 deductible).

Example 5: A Total Loss With Buy-Back

A massive tree branch falls onto Jessica’s car, which is worth $4,000. The repair costs for her car are $3,000, and the salvage value is $1,500. Luckily, Jessica has a comprehensive insurance policy with a deductible of $200 and a maximum limit of $4,000.

Jessica is also an auto mechanic, and she wants to keep the car and repair it herself.

How Jessica’s Comprehensive Insurance Coverage Works:

  1. The salvage value ($1,500) plus the cost of repairs ($3,000) is more than the ACV of the car ($4,000). Therefore, the comprehensive insurance company determines the vehicle to be a total loss.
  2. Jessica contacts her comprehensive insurance company to keep her car rather than having it salvaged.
  3. The comprehensive insurance company will send Jessica a check for $2,300 ($4,000 policy limit minus the $200 deductible and minus the $1,500 salvage value).

Example 6: Minor Accidents That Do Not Exceed the Deductible

Marcus’s car is slightly damaged in a windstorm. The repair costs for his car are $450. Marcus has a comprehensive insurance policy with a deductible of $500 and a maximum limit of $5,000.

How Marcus’s Comprehensive Insurance Coverage Works:

  1. Because the total repair costs are lower than the deductible, Marcus needs to pay the entire $450 of the repair costs.

Comprehensive Insurance in California Doesn’t Have to Be Expensive

You might feel like comprehensive insurance is supposed to be expensive. But that doesn’t mean you can’t get a good deal! All it takes is a few minutes to get a quick online quote, though speaking directly to an expert online or in-person is always an option too.

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