Comparing Auto Insurance: Collision Coverage Vs. Comprehensive Coverage

Your auto insurance policy provides coverage under many headings such as liability insurance, uninsured/underinsured motorist coverage, collision and comprehensive coverage, etc. Some of the coverages are mandated by law while some are optional. Collision coverage and comprehensive coverage are optional insurance coverages that you can purchase from your insurer.

Each type of coverage serves a specific purpose. Collision coverage pays for damages caused to the policy holder's vehicle due to an accident, whether or not the policy holder is at fault. Comprehensive coverage also pays for damages to the policy holder's vehicle caused from anything other than an accident - for example, theft or vandalism, flood and fire will be covered under comprehensive insurance. Both types of coverages address mutually exclusive damages to your car, so they are both good to have.

Collision and comprehensive coverage typically come with a deductible. If you submit a claim for damages, you will have to pay the amount designated as deductible out of your pocket. Then your insurer will pay the remainder restricted by a maximum limit in your policy. Say you have a $500 deductible on your collision coverage. If it costs $2,000 to fix your car damaged in an accident, you will have to pay $500 and your insurer will pay $1,500.

The amount of deductible directly affects your premium. A smaller deductible means a larger premium. You must consider your driving history and risk of suffering damages before deciding on the need for a particular type of coverage and the amount of deductible you wish to pay for it.

Collision coverage is generally good for every driver, unless your car is old and its book value is not worth the premium you have to pay for the coverage, or you drive infrequently.

If you live in a theft-prone area or have a high risk of natural calamities, you must get comprehensive coverage. If you have a garage and have no fear of vandalism or fire or floods, you may choose to decline comprehensive coverage or stick with a high deductible.

Insurers typically offer a bloated insurance plan with low deductibles to good drivers to earn large premiums. So carefully study the policy and evaluate your needs before signing up.