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Comprehensive vs collision insurance: a guide

By Insurance.com Posted : 01/08/2015

The only way to guarantee that your damaged car is repaired or replaced is to buy collision and comprehensive insurance.

These types of insurance are known as physical damages coverages. They address two different types of accidents. You usually cannot buy collision coverage without also buying comprehensive. You may be able to buy comprehensive coverage by itself, depending on the insurance company.

Unlike liability insurance, no state requires that you buy collision or comprehensive coverage.

If you have a loan or lease on your vehicle, your lender typically will require that you purchase these coverages to protect the lender’s interests.

The cost of collision and comprehensive coverage is determined by the value of the car, your own driving record, the deductible you choose and how difficult the vehicle is to repair.

The difference between comprehensive and collision

Comp and collision ensure that you will be able to repair or replace your car for damage that would otherwise be unaffordable.

Collision coverage pays to repair or replace your car:

  • If you are at fault in an accident
  • If you are not at fault in an accident but the other driver is uninsured
  • If you have an accident and fault is disputed
  • If you are the victim of a hit-and-run

Collision coverage also allows you to get your insurance company involved on your behalf even when you are not at fault. If you file a claim for damage and pay your deductible, the insurance company will seek restitution from the at-fault party, including your deductible.

Comprehensive coverage pays to repair or replace your car:

  • If the vehicle is stolen
  • If the vehicle is damaged by fire, flood, hail, vandalism, a falling tree or natural disaster
  • If you hit a deer or other animal

These coverages typically extend to vehicles that you rent, too.

In every case, you will owe a deductible that must be paid before insurance coverage kicks in.

How much comprehensive and collision coverage should you buy?

You cannot choose how much comprehensive and collision coverage to buy; the most your insurance will pay out is the car’s actual cash value – what the car was worth on the open market just before the damage occurred – minus your chosen deductible amount.

You can negotiate the actual cash value of your car in the event of a total loss by providing different examples of similar cars.

Settlements should include taxes and fees you paid at purchase.

How should you choose a deductible amount?

A higher deductible will mean lower premiums. (See “How much can I save by raising my deductibles?”)

Your deductible should be an amount you can easily pay. Most drivers choose $500.  If you cannot pay your deductible, the repair shop can file a mechanic’s lien to keep your car until you can find the money.

If you lease your car, your lender may require that you keep your deductible below a certain amount.

When should you file a comprehensive or collision claim?

In general, comprehensive claims will not raise your rates unless you file multiple claims in a short period.

A single collision claim may or may not raise your rates, depending on the company. On average, data Insurance.com commissioned from Quadrant Information Services showed an average increase from a single claim under $1,000 of about 18 percent.

Two collision claims will almost certainly increase your rates. The average increase for a driver with two at-fault property damage claims of $1,000 or more was 99 percent, based on the sample driver used by Quadrant.

We recommend you save your insurance for big claims. (See “The fender-bender: To claim or not to claim?”)

When should you drop comprehensive and collision coverage?

More than 90 percent of owners buy comprehensive and collision on cars less than eight years old; by the time cars are 12 years old, that percentage drops to about half.

Much will depend on where you live and your driving record. If you live in a high-cost state or have several claims driving up your rates, dropping collision and comprehensive might make more sense than it would if you were paying less.

Some experts suggest dropping these coverages when their annual cost exceeds 10 percent of the potential payout amount. Others give a flat floor, such as when the car is worth less than $2,000. (See “When should I drop collision coverage?”)

We recommend you drop comp and collision when you would no longer make a major mechanical repair such as a new engine or transmission.

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