Auto Insurance

Understanding Collision and Comprehensive Insurance

When heading out on the road in your vehicle, you probably make it to all of your desired destinations and back home without any problems. However, if an accident does happen, it can be expensive.

In 2015, over 48 million dollars in losses were incurred by auto insurance companies in the U.S. as the result of physical damage to private passenger automobiles, according to the recently released Auto Insurance Database report from the National Association of Insurance Commission (NAIC).

If your vehicle is damaged, would you be able to afford the costs to repair it and continue with life as usual? While liability car insurance is required for drivers in all 50 U.S. states., it only covers the other driver, not your car.

If you want more protection, you’ll need to add the optional coverage provided by collision and comprehensive insurance. Both of these cover your vehicle, but in different scenarios. Read on to learn about the differences between collision versus comprehensive auto insurance coverage, their advantages and how to decide if either one is right for you.

Comprehensive insurance

Comprehensive car insurance, also referred to as ‘other than collision’ or ‘comp’ insurance, will pay for damage to your car in the event that the cause of damage was not within your realm of control. Examples of qualifying causes include:

  • Theft
  • Vandalism
  • Natural disasters such as a tornado, hail storm or hurricane
  • Damage from animals
  • Falling objects
  • Fires
  • Explosions
  • Terrorism

If your vehicle is damaged due to a qualifying cause and you have coverage, you can call your insurer, file a claim, pay your deductible and have your car repaired or replaced at no further cost to you. If the car is totaled, you will receive the actual cash value (ACV) of your car, which is the original price of the car minus depreciation. Often, if you are leasing or financing a car, this type of coverage will be required to protect the lender’s investment.

When it comes to the deductible, most insurers will let you select the deductible/premium combination that you want. According to insurance company Allied Insurance, standard deductible options are $250, $500 or $1000. The higher the deductible, the lower the monthly premium and vice versa.

Do you need it?

If you were to walk out to your car to find that a tree fell on top of it, a thief broke your window or someone keyed the entire side, you wouldn’t have to worry. While these may not be everyday occurrences, they can be expensive to repair when they do happen.

In 2015, 2.73% of people with comprehensive insurance filed a claim and the average claim amount was $1,671, according to the International Organization for Standardization (ISO).  So, if you file a claim for $1671 and your deductible is $250, $1,421 is covered by your insurance.

However, what cost do you pay for this coverage? While the average annual cost for the premium on a liability insurance policy in the U.S. was $530.51 in 2014, the annual premium for comprehensive insurance averaged $143.45, according to the Average Expenditures for Auto Insurance By State report from the (NAIC).

Your premium can vary based on a number of factors including age, location, driving history and more. The more risk you present, the higher the cost. For example, it will be more expensive if you live in an area of high-risk, such as a tornado or hurricane-prone state, or a city with a high crime rate.

Deciding whether this insurance is worth it to you will depend on the value of your car, the risk of damage you face, if you want peace-of-mind and how much coverage will cost you. Shop around, run the numbers and weigh the risks to decide if comprehensive coverage is right for you.

If you are concerned about accidents when you are driving, read on.

Collision insurance

The other type of insurance that protects your vehicle is called collision insurance. It protects you in scenarios where damage to your car occurs and the cause was within your realm of control. Examples of qualifying situations include the following:

  • A collision with another vehicle
  • A collision with a stationary object
  • If you roll your car
  • Damage due to running over potholes

If you want collision insurance, most insurers require you to get comprehensive coverage as well. When you have both, it’s commonly known as having ‘full coverage’. This type of insurance is also often required when leasing or financing a vehicle, but it can be beneficial to protect your own investment if accidents occur.

When you file a claim and pay your deductible, repairs will be made to your vehicle as long as the cost of repairs doesn’t exceed the total cost of the car. In the latter case, your vehicle would be declared a total loss and you will receive compensation totaling the ACV of the car.

Adding comprehensive and collision insurance to your car insurance policy provides protection of your investment in almost any scenario. However, it does come at a cost. In 2014, the average collision insurance cost was $308.32, according to the NAIC report mentioned above. So, taking the reported average costs into account, you would pay $530 for liability, $308 for collision and $143 for comprehensive, which would total a premium cost of $981 per year.

Do you need it?

When it comes to the likelihood and costs of claims, according to ISO, 6% of people with collision insurance filed claims in 2015, with an average claim amount of $3,350. Deciding whether it will be worth it to you will, again, depend on the value of your car, if you want peace-of-mind knowing damages will be covered, the costs of coverage for you and how much risk you are exposed to.

Shop insurance providers

While your level of risk, your personal preference on having coverage and the value of your car are in your court, we can help you find the best deal on coverage. If you’re interested in finding out what comprehensive insurance or full coverage will cost you, head over to our auto insurance review page. There, you can vet a long list of insurance providers, read real user reviews and get quotes from the companies you are interested in.