Here’s what you need to know about collision vs. comprehensive car insurance.
Collision vs comprehensive car insurance: which do you need? Collision and comprehensive car insurance are optional in every state. They’re required by lenders if you are financing or leasing your vehicle. These types of coverage are not mandatory if you own your vehicle. Adding either type to your insurance policy can be beneficial in certain scenarios.
Here’s what you need to know about collision vs comprehensive car insurance and whether or not you need it.
Collision vs comprehensive car insurance
Collision insurance: If you are involved in a car accident with another vehicle, collision coverage will pay for any damages to your vehicle. It doesn’t matter who is at fault. This applies to any damages to your own vehicle. If you get into a single-car accident, collision coverage will cover damages to your car in that case as well. For example, if you hit a street sign or pole, collision insurance will cover those damages.
But, collision coverage is usually expensive to add to your car insurance policy. Collision coverage costs an average of $814 per year, according to Forbes. While the price is high, it could end up saving you money in the long run. If you do get into an accident and damage your vehicle, you’ll only have to pay your deductible
Comprehensive insurance: Comprehensive insurance covers your vehicle up to its actual cash value for non-collision accidents. This includes damage from severe weather, like flood, hail or fire, vandalism, theft, falling objects and collision with an animal. Comprehensive coverage is generally cheaper than collision coverage, costing, on average, $367 a year, according to Forbes.
If you live in an area with high levels of crime, a break-in or theft is likely to occur. If you live somewhere prone to flooding, you may need comprehensive insurance more than other drivers. Living in a rural area where the odds of hitting a deer are quite high increases this need as well.
Which do you need?
Roughly 79% of insured drivers buy comprehensive coverage also to liability insurance. Additionally, 75% buy collision coverage. This information is from the Insurance Information Institute (III) (which used 2020 NAIC data).
If you own your vehicle, you’ll have the option to forgo comprehensive and collision coverage. You can do this if you decide you don’t need it. Here’s what to consider.
— Are you financing or leasing your vehicle? If so, your lender or leasing company will must you to have collision and/or comprehensive coverage. This must be included in your policy.
— Can you afford to repair any damages to your vehicle that may happen as a result of an accident? If your car gets stolen, can you afford to buy a new vehicle? If not, adding comprehensive and/or collision coverage to your policy can give financial protection if either of these events occur.
— How much is your vehicle worth? In some cases, adding collision or comprehensive coverage to your policy isn’t worth it. Collision and comprehensive insurance covers up to the actual cash value of your vehicle, minus the deductible. So if you have an old car, you’ll likely end up paying more money in premiums. The amount of money you’ll get back from the insurer will be less. For this reason, dropping collision coverage on older vehicles
