Comprehensive vs. Collision: What's The Difference

Auto insurance policies can be dense, confusing documents. Even the summary is filled with terms that may not make any sense. But drivers need to know what they're reading so they can make smart decisions when comparing policies and understanding what's covered.  

Almost every state requires a minimum car insurance coverage. This always includes bodily injury liability and property damage liability. Some states will also require personal injury protection and uninsured/underinsured motorist protection. These elements of an auto insurance policy will cover the expenses of another person in accidents that are determined to be your fault.

But what about damage to your own car? That's where comprehensive insurance and collision insurance is needed. Knowing the differences between these two types of coverage can help you find a policy that's best for your circumstances. Let's take a closer look at these elements of auto insurance policies:

The Facts on Collision Insurance

Collision insurance isn't required by law, but most banks or car dealerships that are financing or leasing your vehicle will demand it. In most cases, it's smart to have. Simply put, it covers the damage to your vehicle when you hit an object while driving. This is what is used after you collide with something to pay for repairs or even the full value of your car or truck, in the event that it's totaled. 

The accident doesn't just have to be with another vehicle, although that is the most common case. Collision insurance will also cover you if your car hits a sign or a tree. If your car rolls over or is damaged by a pothole, for example, your collision insurance will also cover your expenses.

The Facts on Comprehensive Insurance

Of course, there are plenty of situations that result in damage to your vehicle that don't necessarily involve crashes. If your car gets vandalized or stolen, you'll need to be covered by comprehensive insurance to benefit from your policy. Again, most lenders will require this insurance.

If you get into an accident with an animal or a tree branch falls on your car, the damage will likely be covered by your comprehensive insurance. Weather events, such as hail storms, fires and earthquakes, along with explosions and civil unrest, are also times when you'll be glad you have comprehensive insurance.

Some comprehensive insurance policies will only insure your car for what it is currently worth, based on the depreciation. It may be more expensive to replace the vehicle. In some states, you can have the option of purchasing extra coverage, which is known as gap coverage, to buy a new car.

Deductibles and Premiums

While the covered circumstances of collision and comprehensive insurance differ, these types of policies do have some similarities. You pay for both with what are called premiums. This is a monthly amount you pay for your coverage, whether you file a claim or not. One way to reduce your monthly premium is by increasing your deductible, which is another similarity between these two policies.

A deductible is the amount of money you have to pay out-of-pocket for a repair before your insurance kicks in and pays the rest. You'll want to look closely at deductible limits to see if you are able to afford to pay this when you must file a claim. A lower deductible will increase your premium, but you won't have to pay as much if you have an accident.

Both collision and comprehensive insurance will pay for repairs unless the cost to fix your car is more than the car is worth. That's when the insurance company will "total" your car and pay you the book value of your car. To see the value of your vehicle, go online to Kelley Blue Book.

Considering Your Coverage

Should you buy collision and comprehensive insurance to cover your vehicle? There are a few things to consider regarding your choice of adding comprehensive and collision insurance. They include:

• Your vehicle's value: If your car is old, it may cost more for you to pay premiums and a deductible than to simply purchase another vehicle of the same value. However, if your car is new, you could save a lot of money by covering it from damage.

• Your driving habits: You'll want to consider these extra coverage options if you drive long distances, as the risk that something unforeseen will happen will increase. If you have a history of fender benders, for example, collision insurance may be a very wise choice. 

• Where you live: What are the risks within your community? If it is a heavily wooded area or one prone to earthquakes, for example, you may want to protect yourself with comprehensive insurance. 

• Your emergency fund: If you have plenty of savings and you are able to cover any damages or buy a new car, you may not need to pay for additional insurance options. 

Can You Buy One Without the Other?

Often, insurance companies will sell collision and comprehensive insurance as a package. But not always. According to a 2016 report by the Insurance Information Institute, 77% of U.S. drivers opt for comprehensive insurance, while 73% buy collision insurance. 

There are a few reasons why some drivers may prefer comprehensive over collision insurance. First, on average, comprehensive is less expensive. This is because it covers less frequent causes of accidents. On average, it costs around $134 a year, while collision insurance costs on average $290 a year. There's another reason why many people elect comprehensive coverage: That's what is used to repair the frequent complaint of a cracked windshield. 

Conclusion

When considering policies and considering collision and comprehensive insurance, you'll want to do the math. If your vehicle is older, your environmental risks are low and you're a cautious driver, you may be able to forego coverage to save money. However, you never know when an accident can occur. Comparing deductible and premium options among policies may make peace of mind more affordable than you think.