Having car insurance when you drive is the law. The thing is, in a lot of states the legal minimum requirements largely exist to cover the costs you might cause other people.
For car insurance in California, the state minimums coverages are $15,000 bodily injury per person, $30,000 per accident and $5,000 property damage. These are minimums for liability coverage – ie coverage for the cost of bodily injury or property damage you could cause other people.
What about the costs to repair your car if you hit someone else’s? What if there isn’t another vehicle involved, or your car gets stolen?
Comprehensive and collision insurance are the types of insurance that will cover your costs in these situations. Both cover the costs should something happen to your vehicle.
So, what is the difference between comprehensive and collision and how they protect your vehicle and your finances?
Comprehensive vs collision
Comprehensive and collision coverage cover costs related to your vehicle. Collision coverage is for things that could happen to your car while you’re driving. Comprehensive is for everything else.
So say you hit a tree while driving – the damage to your car would be covered by collision insurance. If your car was parked on the street, and a storm brought a tree down on the windshield, this would be covered by comprehensive.
Here’s a summary of the key differences:
|Your car hit a tree||A tree fell on your car|
|You hit another vehicle||Your car is damaged by a fire/natural disaster|
|Your car is damaged driving over a pothole||Somebody stole your car|
What is the cost difference between comprehensive vs collision?
Adding either comprehensive or collision insurance to your policy will increase your premium compared with a liability only policy. Essentially you are protecting yourself against a wider range of risks.
Collision generally costs a little more than comprehensive insurance.
According to Insurance Information Institute data for 2015, the average car insurance expenditure for collision cover was $322.61 and $148.04 for comprehensive cover.
There are big variations between states, however. Keep in mind that your own circumstances will play a major part in the rate you pay, as will the deductible level you set.
Do I need comprehensive or collision?
Neither is mandatory. However, while you aren’t required to have them, adding them to your policy could make sense depending on your situation.
Approximately 78 percent of drivers have comprehensive insurance and 73 percent have collision insurance.
If you are leasing a vehicle or are paying off a vehicle loan, you could still be obliged to take out comprehensive or collision insurance.
Beyond that, there’s a couple of big things to consider if you are thinking about comprehensive and collision coverage.
1. The value of your car
The biggest factor to consider is the age of your vehicle.
Cars begin to lose their value almost right away. Edmunds data suggests a new car loses around 10% of its value the moment you leave the lot. Over five years your vehicle will depreciate by 15%-25% every year.
This fall in value creates a problem. If you total the car, the amount will get from the insurance company could be much less than the purchase price. This means you would have less money to buy a replacement.
Deciding whether full coverage makes sense is just a question of math. Ask yourself if the age, mileage, or wear and tear on your vehicle mean that the payment you would get from your insurer isn’t worth the extra monthly payments for full coverage.
2. What you can afford
This doesn’t just mean the extra premiums. Think about if you would be in a position to pay the repair or replacement costs out of pocket if you didn’t have comprehensive or collision coverage.
If you were able to claim a significant amount back on a comprehensive or collision policy, this would go some way to offsetting costs you would have to pay.
If you don’t have savings and heavily rely on the use of your car, getting collision and comprehensive insurance could be a good shout.
The best solution is to work out how much coverage you can afford and base your decision on that.
The Cover app is here to help make the decision easier. Simply download the app, answer a few questions and you’ll get a quote for level of coverage you want at a great price.
When to drop collision coverage
There are times when it’s in your best financial interest to drop collision coverage. To figure out when to drop collision coverage, you should run the numbers.
If your car is nearing 10 years old or your collision, you might be better off dropping collision coverage. At that point, you are most likely spending more money on the coverage than what your vehicle is worth.
You can also calculate how much your yearly premiums cost over the course of three to five years. If that total equals or exceeds your car’s value, you should consider dropping collision coverage.
If that’s the case, you could put the money you’re paying in collision coverage and put it in a fund for emergency repairs, maintenance, or buying a new car.
What isn’t covered by comprehensive or collision?
Even if you have collision and comprehensive, this won’t cover every eventuality. For example, neither of these coverages would take care of your medical bills. Likewise, if you are hit by a driver with no insurance, or not enough liability cover, then uninsured and under-insured motorist coverage would take care of this
If you want the peace of mind of knowing that you’ll have a vehicle should yours go in for repairs, then you should look for a policy with rental reimbursement coverage. This will help with the cost of a rental car while your car is out of action.
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