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The basis of car insurance is liability insurance. It pays for the harm you do to others. For this reason, you need to know comprehensive insurance as the two liability insurances for your car.
As part of the social responsibility of driving, you should be able to pay for damage you cause, and liability insurance offers a system for this.
The two important components of good car insurance are collision and comprehensive insurance. You are doing something that liability insurance will never do – you pay for damage to your own vehicle or compensate you if it is stolen.
Find out what comprehensive insurance protects how it differs from collision insurance and how coverage limits and deductibles apply.
Comprehensive car insurance pays for damage caused by something other than your car being driven into something else.
It’s a coverage that helps you pay for your vehicle to be replaced or repaired if it is stolen or damaged in a non-collision incident.
Comprehensive coverage, sometimes referred to as “out of collision”, typically covers damage caused by fire, vandalism, or falling objects (such as a tree or hail).
If you are financing or leasing your car, your lender will likely need full coverage. If you fully own your vehicle, this is optional coverage for your car insurance.
Whenever you are buying auto insurance or checking your current policy, consider getting comprehensive coverage. .
The comprehensive insurance also pays in the event of theft. If your car is stolen, fully comprehensive coverage will cover the cost of replacing your car or repairing damage when it is restored.
The comprehensive insurance is usually subject to a deductible. This is the amount you will have to pay before your insurance coverage takes effect.
Let’s say you have a $500 deductible. If your car is damaged in a hailstorm and costs $900 to repair, you will be responsible for $500 and your insurer will cover the remaining $400.
The main benefit of having comprehensive insurance coverage is that you can have peace of mind while you are not in your car. Comprehensive insurance coverage ensures that you get a refund if your car is seriously damaged or stolen.
Please note, however, that due to your deductible, fully comprehensive insurance is usually not an advantage in the event of minor damage such as a broken bumper or minor vandalism.
For example, if vandalism keys your car and costs $600 to repair, your fully comprehensive insurance with a $1,000 deductible will not pay for any of the repairs.
If you take out Comprehensive insurance, choose a deductible, i.e the amount that you will pay out of pocket for an insured loss. Let’s say you choose a $500 deductible and your car is later damaged by hail as part of an insured loss.
If it costs $1,500 to repair your car, you’ll pay your $500 deductible and your insurance will pay the remaining $1,000.
Comprehensive insurance has a limit or the maximum amount that your policy pays for an insured claim. The limit of fully comprehensive insurance is usually the actual cash value of your vehicle.
For example, if your car is stolen, your insurance company will reimburse you for the depreciation of your car, minus your excess.
In other words, if you want to replace your stolen vehicle with a newer make and model, you will likely have to use some of your own money in addition to reimbursing your insurer.
Remember that the deductible and the limit in the event of a collision are separate from the deductible and the limit in your policy in the event of a collision.
Your insurer offers comprehensive deductible amounts in fixed steps, e.g. $500, $1,000, or $1,500. Choosing a higher deductible generally means your premiums will be lower, which can save you money upfront.
However, you may have to pay more out of pocket to get a covered claim. Likewise, choosing a lower deductible means that the amount you pay for coverage will be increased. Your agent can help you determine the deductible and limits that best suit your needs.
Collision insurance pays for damage to your car that occurs as a result of an accident.
These include a collision with another vehicle or a collision with a single vehicle, such as sliding into a tree on ice.
Like fully comprehensive insurance, collision insurance has a deductible: the amount you have to pay before your insurance covers additional damage. You specify this amount when you purchase your policy. A higher deductible leads to lower monthly premiums.
The main advantages of collision insurance are that you do not have to worry about high repair costs after an accident, you cannot afford repair costs or you just want peace and quiet.
If you have collision insurance, you can usually start the repair process very soon after an accident. If you are relying on the other driver’s liability insurance to pay for the damage, you may have to wait for the insurance companies to determine who is to blame.
If you file a conflict of laws claim and it is later determined that the other driver’s liability insurance should pay, you will usually be automatically reimbursed.
Another benefit is that you are only negotiating with your own insurance company and not with another insurer who has less incentive to pay your claim.
In most cases, collision insurance can also be used for a rental car, which saves you from having to take out rental car insurance.
While there isn’t a perfect formula or rule as to when fully comprehensive and collision insurance should be canceled, you should generally abandon them as soon as the value of your car and its parts approaches the cost of your premium and deductible.
For example, if the annual cost of your full and collision insurance is $400 and your deductible is $600, you can save money by dropping it when your car is worth $1,000 or less.
These two types of auto insurance have the following in common:
Collision and comprehensive insurance are two types of auto insurance. You are both voluntary by law and pay the cost of damage to your car, but you do so in different situations.
The main difference between collision and comprehensive insurance is the driver’s control over the car accident.
Let’s use the aftermath of a hurricane as an example to illustrate the differences between collision and full. Within this storm, let’s consider two events that may have happened:
In the first case, you had no control over when or why a branch fell on your car. This type of accident would be reimbursed under your comprehensive policy.
In the second situation, you drove your car and threw it into the tree, causing a collision. Therefore, the accident insurance covers the damage.
Because of events such as the hypothetical above, it is important to distinguish between the two types of coverage.
Your newer car is likely to be in better condition and better value, and replacement parts tend to be more expensive. For example, if your car is worth $20,000, you will be eligible for higher coverage than if your car was worth $10,000.
Collision and comprehensive insurance ensures you don’t face costly car damage, so we generally recommend most drivers to have both.
If you’ve leased or borrowed your car, you may need to take out collision and comprehensive insurance. Your lender wants to protect their investment and make sure they have enough funds for the driver to repair the damaged vehicle.
We also recommend that you take out both comprehensive and collision insurance if:
However, as the car ages, collision and comprehensive insurance tend to offer you less value. While the cost of comprehensive and collision damage falls over time as your car depreciates, the lower premium does not tend to keep pace with the lower potential payout if the car is completely destroyed or totally destroyed.
There are arguments in favor of only taking out comprehensive and no collision insurance, even if your car is not valuable. Comprehensive coverage of a lot more hazards than collision insurance – including theft.
Regardless of what your car is worth, having it stolen is a major inconvenience, especially if you rely on it to come to work every day.
Even if your car was only worth $2,000 at the time of the theft and your insurer gave you $1,500, that sum would go a long way toward buying a new vehicle.
In our survey of 10 of the most popular vehicles in America, we found a typical price of $1,969 per year for collision insurance and $164 for comprehensive insurance for new vehicles.
In general, the cost of collision insurance is comparable to liability insurance, while comprehensive is around a tenth as expensive as liability insurance.
Comprehensive and collision insurance are not required by law. However, if you lease or finance your vehicle, your lender may require that you get both comprehensive and collision insurance.
Even if you don’t finance or lease your vehicle, it is usually a good idea to take out comprehensive and accident insurance.