What is comprehensive insurance, and what does it cover?
Whenever you’re involved in an auto incident, you’re always asked the golden question: “Do you have insurance?” The answer can be yes or no. But people who are truly knowledgeable about insurance and their coverage will respond with “what kind of insurance?” You would then assess the situation and decide what kind of insurance claim you’ll be filing. For most car damage, insurance holders will use liability insurance.
The auto insurance business is based on liability insurance and the responsibility to repay an individual whose car you may have damaged and vice versa. More optional and in-depth insurance coverage comes from comprehensive and collision policies. These are especially helpful when you’re faced with a scenario in which your car receives damage where you’re the one in need of repair funds.
It’s important to know what comprehensive and collision insurance covers pay for, the cost, and whether or not it would be worth it in your case.
What is comprehensive insurance, and what does it cover?
Comprehensive insurance, sometimes called “accident” insurance, pays for damage done to your car in non-human error incidents. Insurance companies list these under “acts of nature” or “acts of God.” Essentially damage that you find done to your car rather than damage you caused. Here are a couple of instances where comprehensive insurance covers you.
- Natural disasters. Whenever mother nature throws something at you, comprehensive insurance is there to cover the damages done to your car. Storms, twisters, and hail can all cause significant damage to a vehicle. Some states’ comprehensive insurance covers area-specific disasters such as wildfires, hurricanes, and earthquakes.
- Crime encounters. For any instances where your car is victimized, comprehensive insurance covers any vandalism or theft of a vehicle, from key scratches to smashed windshields. Even if your vehicle becomes collateral damage in a civil disturbance such as a riot, it is covered. Stolen vehicles are reimbursed minus the deductible. Acts of terrorism are also covered in the policy.
- Collisions with wildlife. An oncoming car isn’t the only thing that can seemingly pop up out of nowhere. It’s everyone’s first instinct to break whenever they see a deer jump out onto the road. The animals are so big that a collision with them can cause brutal damage to your car. Comprehensive insurance covers all damage caused by hitting an animal. The wildlife is a part of nature and is, therefore, an act of nature. However, suppose a deer or animal were to cause an auto collision (you swerve to avoid it and end up running into another driver). In that case, your comprehensive insurance will not cover the incident.
- Environmental hazards. If you park your car close to a tree and return to find that a branch has fallen and damaged your car, then the incident would be covered by comprehensive insurance. It makes no difference whether it was due to stormy weather or if the branch fell off due to decay. The same could also be said if you park close by a construction site and your car ends up damaged from falling debris.
Before talking about collision insurance, let’s understand property damage liability (PDL).
48 out of the 50 states require that all drivers have property damage liability so that they would be able to pay for any damage that they cause to another driver. It keeps uninsured drivers off the streets. That’s the main difference between PDL and collision insurance-PDL covers damages done to another’s vehicle, but collision covers damages done to your own car. Collision and comprehensive aren’t required by law since the damage you cause to your own car isn’t of any concern to the legal system.
Collision insurance can cover you in instances where PDL can’t. Examples of collision insurance covering damage to your car include when you hit a driver and when another driver hits you. Insured drivers will cover your damages with their own policy. If they aren’t insured, then your own insurance will cover your damage. PDL serves the legal purpose of covering the cost of the other person’s car.
What is collision insurance, and what does it cover?
As mentioned before, the legally required PDL only covers damage to another person’s car in a crash. Much like the name suggests, collision insurance covers repairs to your own car after an incident. It goes hand in hand with PDL when it comes to covering all repair costs, so you wouldn’t have to pay as much.
Here are the different types of damage where collision insurance will cover you.
- Car-on-car collision. If you crash into another car, collision insurance will cover the damages to your vehicle. At the same time, your PDL will cover the damages to the other driver’s car. This is because you caused the collision and legally must pay the damages. Collision insurance helps you pay for your own repairs.
- Stationary collision. If you were to collide with a parked car, pole, tree, or another stationary object, you’re covered by collision insurance. Since you were the cause of the collision, comprehensive insurance will not qualify. Simply file a collision claim as if you were in an accident and get your car repaired.
- Your car becomes stuck. If you were to crash your car into a ditch, pothole, or anywhere that could cause it to become stuck and damaged, collision covers that damage. Ditches and potholes are tricky since some of them may not be visible to the driver until it’s too late. Despite that, it’s not too different from a stationary object collision. You also qualify for collision coverage if your car flips over.
- Hit-and-run. Whether or not the driver who damaged your car and fled has been identified, a collision claim can be filed with your insurance company. Since the at-fault driver can’t be found, you wouldn’t be able to file a PDL. Their auto insurance company will not cover the costs of your repairs. Your own collision insurance would be your best bet if the driver can’t be identified.
What are some benefits of purchasing comprehensive and collision coverage?
Several policyholders benefit from having comprehensive and/or collision insurance each year. 73% of drivers purchase collision coverage, and 77% use comprehensive coverage. No one wants to deal with high repair costs or be left with a bill you might not be able to pay off.
That’s the main benefit of comprehensive and collision insurance-not worrying about whether or not you can afford your own repairs. Customers will often take out a comprehensive policy in areas affected by inclement weather, a vast deer population, and high crime rates. Collision coverage is especially helpful in states where a large percentage of their drivers lack insurance.
If you have a car you want to keep undamaged and sell, then a collision policy would be optimal. In most cases with leased or financed cars, the renting company requires comprehensive and collision coverage. This helps the renter pay for their car if it’s damaged. A good rule of thumb would be if your car is less than ten years old and/or is worth at least $3,000, then comprehensive and collision coverage are the wisest moves.
How much does comprehensive and collision insurance cost?
Firstly, you have your required-by-law property damage liability coverage, which usually ranges between $1,500 to $2,000 per claim. For the sake of an example, say that your PDL is $1,704 (that’s around the average). The average cost for a collision claim is also around $1,500 to $2,000, though some may be higher than others due to car make and model.
Say that your collision bill is $1,569. Comprehensive insurance operates on a much smaller annual fee of $160 to $190. Say that yours is $184. You would have a bill with a total of $3,462. This example is based on an actual quote. Your insurance is based on your car’s make, model, age, and mileage. As your car gets older, the two coverages may offer less value.
That’s just a scenario when filing a claim. The annual premium cost for collision insurance could be anywhere from $240 to $500. Premiums for comprehensive insurance are $120 to $230. Your rates depend on which state you live in. Example: California has an average annual collision premium of $453.88, while Illinois has a $336 premium.
And the deductibles that comprehensive and collision insurance offer?
Deductibles are included in comprehensive and collision coverage. In the event you make a claim, the deductible will be taken off the cost. Multiple claims during a short period of time can negatively impact your deductibles, so it helps not to file one too often. Deductibles can range from $250 to $1000. At times, they can go even higher. The deductibles also play into the vehicle’s maximum insurance payout. Typically, the insurance payout is equal to the value of your car prior to its collision. The deductible is subtracted from the payout.
Wow, is there anything that comprehensive and collision don’t cover?
Comprehensive collision and property damage liability insurance are often bundled together by insurance companies in what is known as a full coverage package. We’ve gone over all the instances where your insurance will work. But there are some instances where comprehensive and collision insurance won’t be applicable.
No personal injuries sustained in an auto accident are covered by either policy. Injuries are usually covered by your own or the other driver’s liability insurance. If you find your car vandalized and broken into, your comprehensive insurance will cover the car’s damages. However, any items stolen from your vehicle would not be covered. In that case, property or owner’s insurance would have to get involved.
How do both these coverages affect my premiums when I file a claim?
Whenever an insurance claim of any kind is filed, you can expect your premium to be affected. However, some claims impact it far more than others. In the case of a comprehensive claim, your premium would rise by an average of $36 every six months. A collision claim is based on the total amount of damage done in a crash. If you’re at fault for an auto collision that caused at least $2000, your premium can raise an average of $767 in a year. As long as the accident shows up on your car’s record, you’ll continue to pay extra in premiums. Accidents are included on the record for at least three years.
Is it really worth it having both comprehensive and collision insurance?
Comprehensive and collision insurance is not mandatory. So, it’s entirely up to you to invest in the extra premiums. That premium may not be worth it if it’s a large percentage of your car’s value. At that point, it would make more sense to pay for your own repairs out of pocket. Inversely, if you can’t afford to replace or repair your car in a comprehensive situation, then the investment might be worth it.
Remember to consider your car’s make, model, age, and mileage since your insurance payout will be equal to the current value.
On the other hand, there are valid arguments for dropping your comprehensive and/or collision insurance. There’s a handy equation for determining whether or not canceling your coverage would be the best option.
First, subtract the deductible from your car’s value. If you can easily pay the amount out of pocket, then it may not be worth it. Then, take the amount and subtract your policy’s cost (what you pay every six months).
If the result is a negative number, you’re paying more for it than you should. At that point, it’s fair to cancel it. If the number is positive, then comprehensive and collision coverage may be worth looking into.
Simply put, there are situations where your liability insurance will not work, such as the repairs for your own car. Comprehensive and collision insurance offers the policyholder peace of mind and financial security when you have to fix a damaged car.