You just got the car of your dreams, and you’re loving every shiny bit of it. However, the new car also means it’s time for insurance, and you’re not quite sure which type to choose: comprehensive or collision?
Before making a rash decision, take the time to read our article. Here, we’ll provide all the necessary information about comprehensive vs collision insurance so you can cruise around in the car of your dreams without a worry.
A Quick Breakdown
There are five main types of car insurance:
- Uninsured/Underinsured Motorist Coverage
- Personal Injury Protection
Liability insurance is the absolute minimum insurance you must have to possess a car. It helps you pay for medical expenses and property damage if an accident occurs.
Uninsured/Underinsured Motorist Coverage is only provided (and funds can only be claimed) when an underinsured or uninsured motorist is involved in an accident.
Personal injury protection is required in some states. It covers additional accident-related costs, such as rehabilitation.
Comprehensive vs Collision Insurance
That leaves comprehensive and collision insurance. We’ll cover both in detail.
Comprehensive insurance plans pay for damages not related to accidents. As the name implies, these plans cover a variety of circumstances:
- Weather-related damages
- Animal collisions
Pretty much anything you can think of that could cause damage to your car (outside of a collision) is covered by comprehensive insurance.
These plans are sometimes required if you are leasing a vehicle or if it is financed.
These policies have several advantages.
If a cow falls from the sky and hits your car, which is exactly what happened to driver Kerri Kofoed late last year, you’re covered. Further, if your vehicle is stolen or gets swept away in a hurricane, most plans will cover those scenarios, as well.
Furthermore, comprehensive plans often have lower deductibles, which means less money out of your pocket. If you have a vehicle that has high safety ratings, your premiums may be even lower.
Putting it simply, it’s a great way to protect an investment.
There are several points to contemplate when investigating a comprehensive policy.
Always read the fine print. Some policies won’t cover certain damages, and if it’s something that’s likely to occur in your area, you might want that something to be covered. That brings us to the next point.
Where do you live? Are there higher risks of damages not related to accidents or do you feel your vehicle is regularly safe?
Finally, consider if the vehicle is even worth protecting. If you have a vehicle that has high incident reports or costly repairs, your policy will be more expensive.
Comprehensive coverage typically only pays up to the fair market value of your car. If you have an old, beat up truck, the amount you pay for the insurance might not be worth what you would receive if something happened to the car after payments are calculated.
As a general rule, pick a policy with an annual cost that is less than 10% of the vehicle’s cash value.
Ideal policyholders may have one or more of these traits:
- Possess a vehicle with high safety ratings
- Live in a location where vandalism or theft is more likely to occur
- Live in an area with turbulent weather or large animal populations
- Do not have a garage
- Possess a high-value vehicle
Collision insurance covers any damage or repairs related to a covered accident. It also includes accidents involving inanimate objects, such as potholes or trees.
State laws do not require vehicles to have collision coverage, but if you have a loan out on your vehicle, your lender will require it to protect the company’s interests. If you do not take out collision coverage yourself, the bank will add it to your loan payments. Usually, this is more expensive than purchasing it yourself.
While the circumstances vary, this insurance can cover scenarios like the following:
- A driver crashes into a telephone pole
- Hit-and-run accidents
- Accidents involving two drivers
- Backing up into another car or object
Collision insurance is a great peace of mind if you worry about accidents. Even if another driver isn’t involved in a crash, your vehicle is still covered. It also means you won’t have to keep extra cash in your savings account in case of a car crash because the policy will cover damages.
After an accident, collision plans allow policyholders to have their repairs completely covered. Oddly enough, that sometimes means your car’s overall “health” and value can increase after a crash.
Finally, the rate of hit-and-run accidents is sadly high. Collision insurance typically covers these situations, as fault can’t be included in these instances.
There is about a 1 in 240 chance you will be in a major car accident. That’s about .4%. In most states, if you are in an accident and the other driver is at fault, he or she will have to pay for your vehicle’s repairs.
As a result, many people believe optional collision coverage isn’t necessary given the low risk.
But there are several things to consider. If you are wondering whether collision insurance is right for you, ask yourself these questions:
- Am I a risky driver?
- Do I drive often and on populated roads?
- In the event of an accident, would I be able to pay for car repairs or a replacement from my savings?
- Is my vehicle worth the additional cost?
If the cost of coverage for six months is 25% or more of your vehicle’s value, this may not be the best option for you.
If you have any of these traits, you should consider taking out a collision insurance policy:
- There are previous accidents or incidences in your driving record
- You demonstrate unsafe driving practices, such as talking on the phone or texting while driving
- You drive often
- You drive on busy roads
- You often drive at night
Understanding comprehensive vs collision coverage can save you lots of worry down the road, but first, you have to know which path to take.
Which is right for you?
Now that you know, discover ways to find the most affordable car insurance at our website. Savings are only a click away!
Until then, drive safe and buy smart.