UPDATED: Mar 13, 2020
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When comparing car insurance policies, you’ll notice two terms that appear frequently: comprehensive coverage and collision coverage. What’s the difference between these two policies? Should you add both collision and comprehensive coverage to your policy? Today, we’re explaining everything you need to know about collision and comprehensive coverage.
What is Collision Coverage?
Collision coverage is an optional car insurance policy that covers the cost of repairing or replacing your vehicle if it’s damaged in an accident.
With basic liability coverage (the bare minimum legally required), your insurance policy will only cover damage to other people and property in a collision. Basic liability coverage does not cover the cost of repairing your own vehicle. It does not include collision coverage, and no state requires you to have collision coverage.
If you want your own vehicle to be covered in a collision, then you’ll need collision coverage. Collision coverage will cover you for accidents where you were at fault as well as accidents that were the fault of the other driver.
Collision coverage will cover the cost of repairing your vehicle after an accident. If you were in an accident and your vehicle requires $5,000 of repairs, then your insurance company will cover the $5,000 repair bill, minus your deductible.
In situations where the cost of repairing your vehicle is more than the value of the vehicle, then your car will be declared “totaled”. In this case, your car insurance company will send you a check covering the value of the vehicle.
If your car was damaged in an accident where you were not at-fault, then your collision coverage might cover your own vehicle repairs before seeking reimbursement from the other driver’s insurance carrier. Your collision coverage might initially cover the $5,000 in repairs, for example, and then your insurance company will seek to recover that money from the other driver.
Collision coverage is also used during hit and run accidents where your vehicle is damaged but the other driver is unknown.
What is Comprehensive Coverage?
Comprehensive coverage is an optional insurance policy that covers your vehicle in a broader range of situations – including storm damage, theft, and vandalism.
When you just buy collision coverage, your vehicle is only covered in an accident. With comprehensive coverage, you get extended coverage for situations outside of accidents.
Some of the major things covered by comprehensive coverage include:
In many cases, comprehensive coverage also covers other vehicles you drive – like rental cars or a friend’s car.
Should I Buy Both Comprehensive and Collision Coverage?
Basic liability insurance is required to drive on the road. Collision and comprehensive coverage, however, are both optional.
You pay more money when you add comprehensive and collision coverage to your policy. These policies cost a lot more money, but you also get significantly more coverage.
When you have comprehensive and collision coverage, you’re fully covered in virtually all situations. You can relax knowing that your vehicle is covered against vandalism and theft, for example, as well as any collision.
Of course, it’s also possible to be over-insured: some people remove comprehensive coverage from an older vehicle because the older vehicle isn’t worth much money. If that older vehicle is significantly damaged, then the repairs may not be worth it.
Ultimately, like most insurance decisions, it’s totally up to you. You can pay more money today to receive more coverage in all situations. Or, you can pay less money today and assume greater risk.
You May Be Required to Carry Collision or Comprehensive Coverage
In some situations, you’re required to carry collision and comprehensive coverage.
If you finance or lease your vehicle, for example, then the bank or dealership will generally require you to add collision and comprehensive coverage. In this situation, you don’t fully own your vehicle, and the lender is protecting the collateral that secures the loan.
Once your vehicle is paid off in full, then you can remove comprehensive and collision coverage if you wish.
When Should You Drop Collision and Comprehensive Coverage?
You buy car insurance because you want your car to be protected. That’s why most people will buy comprehensive and collision coverage. Generally speaking, it’s a good idea to buy collision and comprehensive coverage – assuming you can afford it.
There are some situations, however, where you might want to drop collision and comprehensive coverage. Dropping these optional coverage policies can significantly lower your insurance premiums.
One of the best ways to decide on coverage is to follow the 10% rule. Some experts recommend dropping collision and comprehensive coverage when the cost of additional premiums exceeds 10% of the book value of the vehicle. If your car is worth $3,000, for example, and your collision and comprehensive coverage costs $320 per year, then it may be worth dropping the extra coverage.
You might also want to drop comprehensive and collision coverage if money is tight. If you’re comfortable assuming a greater amount of risk, and you need to save money on your premium, then you may want to consider dropping optional coverage.
Collision coverage covers damage to your own vehicle that occurs as a result of an accident.
Comprehensive coverage covers damage to your vehicle in other non-accident-related situations, including floods, theft, fallen branches, and vandalism.
For the best coverage, you’ll want to add both collision and comprehensive coverage. Some drivers, however, are comfortable dropping both optional policies on older vehicles.