Among commonly used auto insurance terms are the different types of coverage each policyholder is offered for purchase from the insurer. Many drivers are confused when it comes to the fine details of what is and what is not covered under these coverage options. Collision and comprehensive coverage options are not required by state law, unlike bodily injury and property damage liability and sometimes personal injury protection and uninsured motorist. We can provide a general overview of what collision and comprehensive coverages are and how they provide protection to the policyholder. A quick phone call to your auto insurance company will iron out the specifics as to the exact coverage your insurer provides.
You will notice that every driver is required to carry some type of financial responsibility while operating a vehicle on public roads. This financial responsibility can be carried in a number of different forms, but the most popular form of carrying financial responsibility is by purchasing an auto insurance policy. This policy carries at least the minimal requirement of the state for bodily injury and property damage liabilities. Some states also require carrying uninsured motorist and personal injury protection as well. Drivers who are caught without financial responsibility are punished by state lawmakers with fines, suspension of a driver’s license or vehicle’s registration, and possible jail time.
Once a policyholder has determined the amounts of the state requirements to purchase, additional coverage options may then be purchased according to their needs. It may be that some policyholders can only afford to carry the minimum state requirement and nothing else. Other policyholders will assume more responsibility and purchase additional coverage protection, which is where collision and comprehensive options come into play. Here we will discuss each one individually, defining what they cover and different situations where the policyholder would benefit from having these coverages.
Collision coverage is a type of coverage offered to policyholders by an auto insurance company that will pay for damages done to your car as a result of hitting another car or object. It will also cover any damages that happen to your car when it is hit by another car or object. If the person who causes damage to your vehicle does not have insurance, collision coverage will pay for your damaged car. The amount of money the auto insurance company will pay is determined by, one, how much you’ve purchased and, two, the cash value of your car.
Policyholders who are insuring an older vehicle may not want to carry collision insurance, solely due to the fact that insurance companies will only insure the vehicle up to its cash value. This amount may not be a large enough sum to justify making monthly payments to insure. Compare the extra cost of collision insurance for your older vehicle to the cost of replacing the vehicle to see what would benefit you more in the long-run.
Comprehensive coverage is slightly different from collision, as it provides protection from damaged induced by everything other than “a collision” with another car. When policyholders purchase comprehensive coverage, they are purchasing the right to have the auto insurance company pay for any repairs caused by vandalism, animals, floods or fires. Again, just as with collision coverage, comprehensive insurance coverage may not be worth the cost for an older vehicle as the insurance company will only insure the vehicle up to the cash value of the car.
It is important to note that for both collision and comprehensive coverage, the auto insurance company will require the policyholder to pay a deductible to the insurance company before they will pay the remaining balance of the damages. A deductible is the amount you, the policyholder, agreed to pay to the insurer when you began your auto insurance policy any time you file a claim with them. This amount of money goes towards the final cost of the claim, or total cost of the damages. For instance, if your deductible is $250 and the cost of repairs is $1,250, you will pay your deductible to the insurance company and they will pay the remaining balance of $1,000.
Deductible amounts range from policy to policy because it is the policyholder’s choice to make when deciding on the details of the policy to be purchased. These amounts are usually either $250, $500, or $1,000. While opting for the smaller deductible may seem wise as it is a smaller amount to pay upfront, the larger deductible will give you cheaper insurance rates compared to having the smaller amount. Insurance companies offer lower rates for picking the highest deductible because that will ensure they are paying less for your claims than if you had picked the lowest deductible amount. The best deductible amount for you will depend on your financial situation and if you could afford to pay the highest deductible amount when making a claim.
It was mentioned earlier that some cars may not have enough cash value to justify the added expense of carrying comprehensive and collision coverage. On the other hand, cars that were purchased by a loan or leased will almost always be required to have both collision and comprehensive coverage as a rule from the loan or lease company. These coverages give peace of mind to the loaners that the car will remain in good condition, even if it’s by the repairing of the insurance company, throughout the term of the loan or lease. On a side note, because collision and comprehensive coverage only cover the cash value of the car, you may want to look into purchasing GAP insurance as well since most brand new cars that are financed are usually considered to be upside-down.
Purchasing collision and comprehensive coverage options will protect you from having to pay for the entire cost of repair from damages involving vehicular collisions, hitting a deer, or a flash flood. The state requirements only cover damage you cause to another person’s vehicle, leaving you to foot your own repair bill. It might be a wiser choice to purchase additional insurance to prevent you from paying a large sum to fix something that could have been paid for by your insurer.
