Comprehensive vs. collision. You will likely ask yourself, "what's the difference?" and more importantly, "do I really need either of these on my auto insurance policy?" Understanding what these two selections cover, when you might need to have these on your policy, and what it means for your premiums' cost can help you answer those questions and more.
Oh, and by the way, there are also times where these two "options" are not really an option. You can be required to carry them, making it even more critical to understand the difference between the two and what each cover.
When you hear an agent or see a website referencing a full coverage policy, it means one with liability – which pays for injuries and damage to other drivers – and comprehensive and collision, which pays for damages to your vehicle. These two coverage options have a few similarities, which is why they are often lumped together and perhaps even confused with one another.
Both pay for damages up to the actual cash value (ACV) of your vehicle
They are optional to purchase, but only if you own the title to your car free and clear
There is a deductible amount that applies to both, usually ranging from $0 up to $1,500, depending on the insurer
Most of the time, the two are purchased together, but if you want to purchase separately, you need to ask your insurer if this is an option
Unlike liability coverage, uninsured motorist, and personal injury protection (PIP) coverage, there are no states requiring the purchase of comprehensive and collision
Comprehensive covers damage to your vehicle when the vehicle is damaged by something "other than collisions." Think of this as covering damage from something you can not control. Common examples of damaged covered are:
Natural disasters, such as earthquakes, floods, hurricanes, tornadoes, floods, volcano eruptions
Animals, such as hitting a deer
Vandalism, theft, including the entire car or parts of the vehicle, such as the catalytic converter
Falling objects like trees, branches, ice, hailstorm damage, or rocks
Comprehensive coverage usually has a deductible tied to it if you want to make an insurance claim. A deductible is an amount you pay out of pocket before the insurance takes effect. Most insurers offer a $0, $250, $500, or $1,000 deductible to choose from, with some going up to $1,500. While your first instinct may be to select the $0 deductible, this will significantly impact the cost of comprehensive. If you are trying to keep your costs to a minimum for your policy while keeping the benefit of comprehensive insurance, then consider taking on a higher deductible.
When it comes to keeping a higher deductible, it's important to make sure you have the amount to cover a deductible in savings. This way, if you suddenly have to make a claim, you won't have to reach for a credit card or stress how to cover the unexpected expense.
Collision coverage is used to pay for expenses when you have damage from colliding with another object. This can either be another car, a car accident you caused, a fallen object, or flipping over. It should also cover damage from potholes. The other "object" can also be someone else's property. For example, if you hit a neighbor's fence or mailbox, it causes significant damage to your vehicle. Or if a runaway shopping cart happens to find your car while you are at a store.
Like comprehensive coverage, collision also requires a deductible. Collision insurance claims tend to be more expensive too, which is why the cost of collision is almost always higher than comprehensive. You may also choose an insurance company that offers the "diminishing deductible" option. This is where your deductible is lowered each time you surpass a designated period without making any claims. Carriers such as Allstate, Liberty Mutual, and Nationwide offer this coverage.
How comprehensive and collision coverage impact car insurance rates
Since you are increasing protection to your vehicle, it's natural to assume your car insurance rates will also increase. The table below illustrates the average cost of premiums for both collision and comprehensive on an annual basis. This information was pulled from the NAIC data from 2018 (the latest year available).
Like all aspects of your auto insurance policy, where you live, your age, gender, driving history, vehicle, and credit score, are all significant influences on your exact rates.
District of Columbia
When to purchase comprehensive and collision coverage
Most lenders require you to add these to your policy if you purchase a new car, either via a lease or financing it. But are there other circumstances when you should buy it, even if you own your vehicle?
Consider adding these two options if your car is less than 10 years old and still has a higher fair market value. It would likely be worth it to repair it since the vehicle is still worth a decent amount. If your car is totaled, remember the insurance carrier payout is the fair market value minus the existing damage plus your deductible.
Another point of consideration is how much it would cost to replace your vehicle altogether. If the damage is significant, could you afford to repair or replace it? If your car were stolen today, would you be in a financial position to purchase a replacement? This may seem like an unlikely scenario, but car theft has increased dramatically in 2020 vs. 2019, according to the Insurance Information Institute (III). There is no guarantee this wouldn't happen to you.
If you drive an older car, it may not make financial sense to carry these two options. Assuming you own the vehicle outright, you need to calculate if the cost per year would be worth repairing damage to your car.
The III also reports four out of five drivers choose to purchase these options.
When to drop comprehensive and collision coverage
Once you own your vehicle and it starts aging and is out of warranty, it may be time to consider removing the comprehensive and collision coverage. With the average cost of collision around $377 per year and comprehensive averaging around $167 per year, a simple calculation can guide you through this decision. If the market value of your car is not very high, and the premium is more than 10% of the value, then it's probably time to drop these types of coverage.
For example, if the market value of your vehicle is currently $3,500 and the premium increase for collision is $375 per year, then the cost is more than 10% of the current value. This doesn't include the out-of-pocket cost (the deductible) you select if you have a claim.
Is there any type of damage comprehensive and collision does not cover?
Neither comprehensive nor collision coverage applies to anything involved with injuries. These coverages are strictly limited to damage to your vehicle. Depending on the circumstances, there are multiple avenues for payment of expenses with injuries. This includes the other driver's liability insurance, your PIP policy, medical payments coverage, and possibly your own health insurance. Other exclusions include items stolen from your vehicle. So if you leave your laptop in your car overnight and you wake up the next day to find it's gone; unfortunately, neither comprehensive nor collision can help you. If you have renters or homeowners insurance, however, you may be able to recoup the losses there.
Does comprehensive and collision coverage extend to rental cars?
If you do carry collision and comprehensive insurance coverage, it generally extends to a rental car. When you finalize your rental car agreement, it won't be necessary to purchase the additional coverage offered at the counter. You can choose to pay for the extra coverage from the rental car company if you want to avoid a claim on your own policy. It's also wise to review what exactly is covered with your agent before you rent a vehicle. Speaking of rental, if your own vehicle is in the shop because of a collision or comprehensive claim, you will be responsible for the cost of a rental car. Unless you have purchased rental car reimbursement for your policy, this helps cover rental costs in situations such as this.
The Bottom Line
Comprehensive and collision can add greater financial protection for your vehicle. However, doing so comes with added insurance costs, plus out-of-pocket costs. Most lenders require the purchase of these two coverages. However, if your vehicle is paid off, then these become optional. As the vehicle ages, it's important to reevaluate the need for keeping it on your policy or if it's time to drop collision and comprehensive.
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