While liability coverage protects others when you're at fault, collision and comprehensive coverage protect your own vehicle. These two optional coverages are often mentioned together, but they cover very different types of damage. Understanding the distinction helps you make informed decisions about protecting your car and managing your insurance costs.
Collision Coverage: When Your Car Hits Something
Collision coverage pays to repair or replace your vehicle when it's damaged in a collision, regardless of who was at fault. The name is straightforward: if your car collides with something, this coverage handles the damage to your vehicle.
What Collision Coverage Pays For
Collision coverage applies to a wide range of accident scenarios:
- Single-vehicle accidents: You hit a tree, pole, or guardrail
- Multi-vehicle accidents: Collisions with other cars, regardless of fault
- Rollover accidents: Your vehicle flips or rolls over
- Hitting objects: Damage from striking barriers, buildings, or other structures
- At-fault accidents: When you cause an accident, collision covers your vehicle while your liability covers the other driver's car
- Hit and run: When another vehicle hits yours and leaves, assuming the collision qualifies
The coverage applies whether you're driving, parking, or even if your parked car is hit by another vehicle. If your car collides with something and is damaged, collision coverage handles the repair or replacement costs up to your vehicle's actual cash value.
Comprehensive Coverage: When Other Things Happen
Comprehensive coverage is sometimes called "other than collision" coverage, and that description captures its purpose well. It covers damage to your vehicle from incidents that don't involve hitting something with your car.
What Comprehensive Coverage Pays For
Comprehensive coverage protects against a diverse array of non-collision damage:
- Theft: Your entire vehicle is stolen, or parts are taken from it
- Vandalism: Someone intentionally damages your car
- Weather damage: Hail, floods, hurricanes, or tornadoes damage your vehicle
- Fire: Your car is damaged or destroyed by fire
- Falling objects: Tree branches, rocks, or debris fall on your car
- Animal strikes: You hit a deer, or an animal damages your vehicle
- Glass damage: Windshield cracks or breaks from road debris
- Civil unrest: Damage during riots or civil disturbances
Some scenarios blur the line between collision and comprehensive. For instance, hitting a deer is typically covered under comprehensive because it's considered an unavoidable animal strike, not a collision you could prevent. Swerving to avoid the deer and hitting a tree, however, would fall under collision coverage.
Understanding Deductibles
Both collision and comprehensive coverage include deductibles. A deductible is the amount you pay out of pocket before your insurance coverage kicks in. Understanding how deductibles work is essential for choosing appropriate coverage levels.
How Deductibles Work
When you file a claim, you pay your deductible first, and insurance covers the rest up to your vehicle's value. For example, if you have a $500 deductible and $3,000 in damage, you pay $500 and insurance pays $2,500.
You typically choose separate deductibles for collision and comprehensive coverage. Common deductible amounts include $250, $500, $1,000, and $2,000. Your deductible amount directly affects your premium: higher deductibles mean lower premiums, while lower deductibles mean higher premiums.
Choosing the Right Deductible
Your ideal deductible depends on two factors: your emergency savings and your comfort with risk.
If you have a healthy emergency fund and could comfortably pay $1,000 or more out of pocket, choosing a higher deductible can save you money on premiums year after year. Those savings accumulate, potentially offsetting the higher out-of-pocket cost if you do need to file a claim.
If a $500 or $1,000 unexpected expense would strain your finances, a lower deductible provides more predictable costs. You'll pay a bit more in premiums, but you won't face a large unexpected bill if you need to use your coverage.
Many drivers choose different deductibles for collision and comprehensive. Since comprehensive claims are often less expensive to repair, like windshield damage or minor hail dents, some people select a lower comprehensive deductible while maintaining a higher collision deductible.
When These Coverages Are Required
Both collision and comprehensive coverage are optional from a legal standpoint. No state requires you to carry them. However, lenders and leasing companies almost always require both coverages when you finance or lease a vehicle.
If you own your car outright, the decision to carry these coverages is entirely yours. This is where understanding your vehicle's value and your financial situation becomes important.
When to Consider Dropping Coverage
The question of when to drop collision or comprehensive coverage doesn't have a universal answer, but several factors can guide your decision.
The 10% Rule of Thumb
A common guideline suggests dropping these coverages when your annual premium for both exceeds 10% of your car's value. For instance, if your car is worth $3,000 and you're paying $400 per year for collision and comprehensive coverage, that's more than 10% of the vehicle's value.
This rule exists because insurance only pays up to your vehicle's actual cash value. If your car is totaled, you might receive $3,000, but you've paid $400 annually for that protection. Over several years without claims, you could have saved enough to replace the vehicle yourself.
Consider Your Financial Cushion
Beyond the math, consider your ability to replace your vehicle if it's totaled. If you have sufficient savings to purchase a replacement car without financial hardship, dropping coverage on an older, lower-value vehicle might make sense.
Conversely, if losing your car would create a genuine financial crisis, keeping coverage provides peace of mind, even on an older vehicle. The premium might be worthwhile for the protection it provides.
Evaluate Actual Risk
Your driving environment and habits matter too. If you drive frequently in high-traffic areas, park on busy streets, or live in an area with severe weather or high theft rates, maintaining coverage might be worth the cost even on an older vehicle.
Making the Decision
Deciding whether to carry collision and comprehensive coverage involves balancing several considerations:
Keep the coverage if:
- You're financing or leasing your vehicle
- Your vehicle is new or has significant value
- You couldn't comfortably afford to replace your vehicle out of pocket
- You'd rather pay predictable premiums than face potential large unexpected costs
Consider dropping coverage if:
- Your vehicle is older with low market value
- Annual premiums exceed 10% of your car's value
- You have sufficient savings to replace your vehicle
- You're comfortable self-insuring against the risk
A Middle Ground Option
You don't have to make an all-or-nothing decision. Some drivers drop collision coverage on older vehicles while keeping comprehensive coverage. Since comprehensive coverage is typically less expensive and protects against theft, vandalism, and weather damage, this approach maintains some protection while reducing costs.
This strategy works well for reliable older vehicles that are less likely to be in at-fault accidents but remain vulnerable to theft or weather damage.
The Bottom Line
Collision and comprehensive coverage serve different but equally important purposes. Collision protects against accident damage regardless of fault, while comprehensive covers the many other ways your vehicle can be damaged or lost. Together, they provide complete protection for your vehicle.
The decision to carry these coverages depends on your vehicle's value, your financial situation, and your tolerance for risk. Regularly reassess your needs as your vehicle ages and your financial circumstances change. What made sense when you bought your car might not make sense five years later.