There are multiple types of insurance in your policy and it’s important that you understand each one so you have the insurance that you need and get rid of stuff that you don’t
I think we can all agree that car insurance can be a little confusing. There is so much tiny print in your policy that you don’t always know or understand what’s covered until you have an accident.
With that being said, collision and comprehensive car insurance are two of the more common types of insurance you need to understand. Most people will want to have both, but that won’t be the case with everybody. If you want to have the bare minimum auto insurance coverage so you don’t pay for things you don’t need, there are some key distinctions everyone should know.
What is Collision Coverage?
As its name implies, collision coverage will cover damage to your vehicle in the event of an accident. In most cases, it won’t matter if you were at fault for the accident or another driver was at fault. Collision auto insurance will help you pay for all of the necessary repairs to your car after an accident. If another driver was at fault for the crash and damage, your collision coverage should seek money from that person’s insurer to cover the damages. As a result, your premiums shouldn’t be altered by the accident.
If you’re ever the victim of a hit-and-run accident, you’ll be glad to have collision coverage. Obviously, you won’t be at fault for the damage to your vehicle. But you also won’t be able to locate the guilty party to collect from their insurer. The same applies if you get into an accident with an uninsured driver.
The only caveat with collision coverage is if the cost to repair your car is more than the value of your car. In this instance, your car will be “totaled,” which is only a metaphor. If the book value of your car is less than the estimate to repair it, your insurance company won’t think it’s worthwhile to repair the car. Instead, they will only give you what the car is worth. From there, it’ll be up to you to use your own money to repair the vehicle or simply buy a new car.
What is Comprehensive Coverage?
Collision and comprehensive coverage go hand-in-hand, although comprehensive is a little different. It will cover damage to your car from incidents, which are distinct from accidents or collisions. This can include damage caused by falling trees, fire, or weather like floods and hail. It will also cover losses or damage from vandalism and theft.
Obviously, most of that damage occurs when you’re not using your vehicle. However, the difference between collision and comprehensive car insurance is not whether the car is in motion at the time. Comprehensive coverage also includes damage that’s limited to glass, such as your windshield. Damage to your vehicle caused by potholes or other road obstacles will also be covered by comprehensive coverage rather than collision coverage.
Much like falling trees and vandalism, these are considered incidents rather than accidents, which is why they fall under comprehensive coverage and not collision coverage.
Why Do I Need Collision and Comprehensive Car Insurance?
Most people should assume that they need both collision and comprehensive car insurance. If you have a lease or a loan attached to your vehicle, you will likely be required to have collision and comprehensive car insurance by your financial institution. However, once your car loan is paid in full, you’ll have a little more control over your insurance policy. You may decide you want only the minimum auto insurance coverage required by law.
That being said, it’s important to remember that insurance is there for unexpected events. If you don’t have enough money stashed away for a rainy day to repair or replace your car, you won’t want to go without insurance. Drivers with a history of accidents would also be wise to keep their collision and comprehensive car insurance. Also, people who live in areas where accidents and incidents are unavoidable would be wise to keep their insurance. If you park on the street or drive on congested roads, it’s likely worth it to have as much insurance as possible.
However, there are some occasions when it’s okay to go with the minimum auto insurance coverage required. For instance, if you get into an accident with an older car that isn’t worth as much, it’s more likely to be “totaled” in an accident. The general rule is that if your premium is more than 10% of the value of your car, you can consider going without collision and comprehensive coverage.
Just remember that if you cancel your insurance, you’ll be on the hook for any damages. If you can’t afford to repair or replace your vehicle in the event of an accident, don’t even think about dropping your collision and comprehensive car insurance.