New Drivers’ Guide to Collision & Comprehensive Coverages

Comprehensive coverage is for situations just like this. (perfect market)

Yesterday, we took a look at what new drivers should know regarding liability insurance. That’s the type of car insurance that is required of drivers on a near-universal basis throughout the United States.

Despite that requirement, approximately one of every seven drivers in the United States is willing to tempt fate on a daily basis by driving without it.

It probably comes as no surprise to find out that liability insurance is the most common type of car insurance available, and that’s mostly because it is required by law in just about every state. Unlike liability, collision and comprehensive coverages are completely optional.

Besides the commonality of their optional status, you’ll find they’re not going to be an option in some cases, as you’ll likely have no choice but to purchase them when you’re financing or leasing a new car.

That’s not the only condition a lender may place on you in regards to your automotive policy. It isn’t uncommon for them to insist you carry a deductible on the coverages of $1,000 or less.

The introduction of the deductible – which allows you to accept a bigger risk, since you’re out of pocket for that amount if you make a collision or comprehensive claim – also allows you some control over what you’ll pay for your policie. Deductibles are yet another common element of these two optional coverages.

And they both offer protections on the same physical item – your car. If it’s damaged in a crash, your collision policy will pay. If it’s damaged by some freak act of nature, or it’s stolen, your comprehensive coverage kicks in.

One last area the two have in common: both are greatly influenced by the kind of car you drive. Your insurer will consider how they hold up in an accident, how much they cost to repair when they’ve been damaged in a crash, and if they fall out of the ranges expected of an automobile in the same class.

Let’s take a look at the specifics of collision and comprehensive coverages:

Collision Coverage

As the name implies, collision coverage is intended to cover incidents involving a single car crash, or even a multi-car pile up. But instead of covering the damage to other driver’s cars, it is meant to protect your car.

Beyond a lender requiring it when you finance or lease, we find collision to be a smart buy if you drive an expensive car. But if you’re driving a cheap one – think in the range of $2,500-$5,000 or less – it may cost you more in premiums than you’d ever receive in return from filing a collision claim, even one that involved a total loss.

Comprehensive Coverage

It isn’t uncommon to hear agents refer to comprehensive policies as “other than collision” insurance. And it covers you for a large swath of bad things that can happen to your car not involving a car crash.

Scenarios where comprehensive would pay include: having your car stolen, natural disasters and other acts of nature or acts of God. So if your car were flooded by a hurricane, it’d be covered. Same goes for situations such as when a tree limb falls onto your car. It just wouldn’t pay if you hit the tree.

And as we suggested with collision, comprehensive is a must if you’re driving a car with significant value. You don’t want to have to replace a car only to find you could never do it by yourself.

Will You Pay More for Collision or Comprehensive Coverage?

Without a doubt, you’ll pay more for collision than you will for comprehensive coverage. In general, the liability portion of your policy will be the most expensive component – even when you have full coverage.

Drivers can typically expect that with a full coverage policy, the liability portion makes up 50 to 60 percent of their total premium cost. The collision portion should range from 30 to 50 percent of the premium.

Comprehensive, on the other hand, is a steal, since it only makes up 5 to 15 percent of your total insurance premium. And because it offers so many protections for damage that occurs in ways other than automotive crashes, we think it’s a solid bargain.

Remember, both collision and comprehensive policies allow you to set your deductible amount, which can greatly reduce what you’ll pay for your premium.

And if things get tight, we’d recommend dropping collision first, since comprehensive coverage is such a cheap buy. That would allow you to subtract up to 40-50 percent off your policy premiums, while also preserving the one optional coverage.

Finally, don’t forget – dropping these optional coverages are prudent only if you’re driving a cheaper, older car. And it should not only be cheap to replace, but also inexpensive to repair and maintain. If you have those elements at play, then dropping collision and comprehensive might be a smart move for you.

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