If you just bought a car with a loan, your finance company may have talked to you about comprehensive and/or collision insurance coverage. It’s the same with leasing a car. In both of these circumstances, you’ll most likely need to carry full coverage, which includes comprehensive, collision, liability and medical.
But what is comprehensive and collision insurance and how are they different from other types of car insurance, and where should you stand on the comprehensive vs. collision insurance debate? If you have the choice, for example if you paid cash for your vehicle, should you get one, the other, or both?
In this article, we’ll walk you through the basics of comprehensive vs. collision insurance: how they’re different from other types of car insurance, how they’re different from each other, which one you should get, and how to find cheap collision or comprehensive insurance.
Protecting Yourself Beyond Liability Coverage
If you have the minimum car insurance coverage in your state, then you likely have only liability insurance for your car. Liability insurance helps pay other drivers and passengers to cover their medical and property bills if you’re at fault for an accident.
That means that if you damage your car in an accident and are at fault, then you’re on the hook to pay your own car repair costs. It also means that if your car is damaged and no one is at fault —such as when a tree falls onto your car in a windstorm— then you’ll still need to pay for the repair costs.
But not everyone has the money to spend on a surprise repair bill, and most of us need our cars in good condition to get to work or school. That’s where collision and comprehensive insurance come in. Both types of insurance coverages protect your car regardless of who’s at fault, though they work in different ways.
Comprehensive vs. Collision Insurance
What Does Collision Coverage Cover?
If you’re involved in a car accident, then collision insurance covers the repair costs to your own car, regardless of who’s at fault. Typically, collision insurance coverage scenarios include:
- You’re involved in a car accident with another driver.
- You hit a stationary object such as a tree or pole.
The great thing about collision insurance is that you can make an insurance claim regardless of who’s at fault. Most collision insurance policies will even cover repairs when a friend was driving your car at the time of the accident (you need to give them permission to use your vehicle).
Even if you feel that you’re not at fault for a car accident, you may want the option of making a claim with your collision insurance company rather than waiting for the other driver’s liability insurance company to pay for your car repairs. That’s because insurance companies can take a while to determine fault in an accident.
In extreme cases involving complicated circumstances, it could take months and a court hearing to determine fault. In the meantime, you’re stuck with a damaged car that might be unsafe or illegal to drive. Later on, if it does turn out that the other driver was at fault, then your collision insurance company can file their own claim against the other driver’s liability insurance to get reimbursed. This would also mean that you’d get back your collision deductible.
What Does Comprehensive Insurance Cover?
Collision insurance helps protect and cover you in a lot of traffic situations, but only while you or someone else is driving. If something happens to your car while it’s parked, then comprehensive insurance covers the damage. Typical comprehensive insurance coverage includes:
- Theft (including parts of your car like the hubcaps or radio)
- Vandalism (including when someone keys your car)
- Damage from wind, hail, flooding, and other natural disasters
- Damage from a tree, branch, or pole falling onto your car
- Damage to your car when you hit an animal (this type of damage is not included in collision coverage)
Like collision insurance, you can make a claim with your comprehensive insurance company regardless of fault. However, keep in mind that it may be harder or impossible to claim if you were negligent — for example, someone stealing your car when you left the keys in the ignition. And intentionally leaving your car in a situation where it could get damaged or totaled could lead to a denied claim as well as potential legal trouble.
Basic Parts of a Collision Coverage or Comprehensive Coverage Policy
Though collision insurance and comprehensive insurance cover different things, the policies themselves are structured similarly. The three major components are the deductible, policy limit, and premium.
The deductible is the amount of money you agree to pay toward repairing or replacing your car before the insurance company steps in. For example, if your car repair costs are $2,500 and you have a deductible of $1,000, then you’re responsible for the first $1,000 of the repair costs while the insurance covers the remaining $1,500.
The policy limit is the maximum amount the insurance company agrees to pay toward a repair, minus the deductible. Most insurance companies calculate the policy limit based on the market value of your car, though you can always choose to pay less for a lower policy limit.
The premium is the amount you pay for insurance coverage and is based on how cheap your car is to insure. Remember that you need to pay your insurance premium whether or not you make an insurance claim. If you don’t, then the insurance may refuse to process a claim or cancel your coverage altogether.
Do I Need Collision Coverage or Comprehensive Coverage?
Collision coverage and comprehensive coverage are not legally required in any state. However, suppose you finance or lease your car. In that case, the financing or leasing company can require you to keep a minimum amount of collision or comprehensive insurance coverage until you pay off the auto loan or the lease term is over. That’s because the financing or leasing company still owns the car while you’re making payments, and the company wants to be financially protected if the car is lost or totaled.
If you don’t get contractually required collision or comprehensive coverage on your own, then the financing or leasing company can take out a policy on its own and force you to pay the bill. Before you sign a car lease or loan agreement, make sure to read the fine print about insurance requirements so that you know exactly what kind of insurance to shop around for.
Comprehensive vs. Collision Insurance: Either Way, Why Pay More?
Whatever you decide on comprehensive vs. collision insurance, you shouldn’t have to pay more than you have to for car insurance. At Freeway, we believe that everyone deserves affordable car insurance, regardless of your driving record or ability to pay. Why not check now for a free collision or comprehensive insurance quote? Or you can visit one of our offices or give us a call at (800) 777-5620.