Comprehensive insurance and collision insurance are two types of auto insurance that are part of a full coverage policy. They pay to repair physical damage to your vehicle after an accident, regardless of fault, or an event that doesn't involve a collision, such as theft or damage caused by inclement weather. Comprehensive and collision insurance aren't legal requirements in any state, but if you have a loan or lease for your car, you'll need both. Without comprehensive and collision insurance, you'll have to pay out of pocket for repairs to your vehicle in any situation where another driver isn't responsible.
Collision insurance covers accidents, rollovers, and single-car accidents. For example, if you hit a telephone pole, collision insurance would pay for the damage. Comprehensive insurance pays for damage to your vehicle after a non-collision incident, such as theft or weather-related damage. It also covers aspects such as fire damage, floods and accidents involving animals.
A notable difference between collision coverage and comprehensive coverage is that you're more likely to see increases in car insurance rates for collision claims than for comprehensive claims. Collision claims are often your fault, so your rate is more likely to increase. Comprehensive claims are generally not guilty incidents, so your rate may not increase as much. You're not legally required to have comprehensive or collision insurance, but that doesn't mean you don't need full coverage.
If you have a loan or lease for your vehicle, you'll have to drive a vehicle against all risks and another collision vehicle. Aside from that, it's still a good idea for many drivers, especially those who can't afford repairs out of pocket. Without comprehensive and collision insurance, you risk covering all the repairs or total replacement of your car on your own. The best way to save on optional coverage for your car is to combine your auto and home insurance. Other major discounts include discounts for safe drivers and good students.
When it comes to collision and comprehensive insurance, the claim process works in a similar way. After the loss, you'll need to document the damage and report the incident to your insurance company. Once the claim has been filed and a claims appraiser has been assigned to your claim, they will investigate the loss, verify your coverage, and determine how much money you are owed. You will then be offered an agreement to cover the cost of repairs to your vehicle (or buy a new vehicle, if your car was left in total). In the event of a total loss, your settlement will be based on the actual cash value (ACV) of your vehicle, minus a deductible. At a certain point, it no longer makes sense to pay for collision insurance and comprehensive insurance.
As a general rule, if your comprehensive and collision insurance premiums and deductibles are equal to or greater than the fair market value of your vehicle, it's probably time to cancel your coverage. If your premiums exceed 10% of your potential payment (the value of your vehicle minus your deductible), experts say you may want to withdraw your coverage for physical harm. Depending on your deductible and other factors, you might consider leaving comprehensive and collision insurance if the value of your vehicle is lower than the amounts shown below where the cost of insurance and the deductible are equal to the value of your car. Of course, if you still have a car loan, you'll have to keep your coverage until you cancel it. At the end of the day, it's up to you to decide if coverage is worth keeping. And when you start paying a significant portion of the value of your car in premiums each year, you simply overpay to offset the real level of risk that still exists at least when it comes to collision damage to your own vehicle.