Auto insurance doesn’t have to be confusing! Policies have various requirements depending on your situation, but auto insurance basics are easy to understand with a little research. Today we’re going to look at one of the most common questions people have when picking auto insurance: “What’s the different between collision and comprehensive insurance, and do I need to buy a policy that has this type of coverage?”
Collisions insurance covers damage primarily related to accidents. This type of policy covers damage that others may do to your car (accidentally running into you, backing into your car, etc.) as well as damage you may do to your car in accidents you cause in similar situations. It also covers damage done even when someone else isn’t involved, such as accidentally hitting a tree or mailbox.
Comprehensive insurance covers a variety of other events that can cause damage to your car, but aren’t related to accidents – or, at least, don’t have clear liability. That includes weather damage from hail or wind and nature-related damage like rat nests or crashes into an animal. It also includes rare events like fires that damage your car, objects that fall on your car, and nearby explosions that damage your car. Perhaps most importantly, comprehensive insurance covers theft and theft-related damage to your car, making it a very popular option in areas that have higher levels of car theft or vandalism.
Collision and comprehensive auto insurance are typically sold together, either bundled with a general liability plan, or sold separately as a potential add-on. However, you can usually add them individually if you only want one, depending on your policy and your needs. States generally don’t require collision and comprehensive insurance, only basic liability policies.
However, lenders are an entirely different matter. If you take out an auto loan to purchase a vehicle, then your lender will probably require that you also get collision and comprehensive insurance, to better protect the investment the lender has made in giving you a loan. The same is also true of leasing a car: Leasing company will almost always require you to get collision and comprehensive insurance.
If you own your car, then it’s your decision whether or not to get these extra types of insurance. Costs can be significantly higher: In some states, policies with collision and comprehensive are twice as expensive as policies without them! However, the extra cost may be worthwhile if it covers important repairs to a newer vehicle. If you have an old car – especially one that has seen better days – then this type of insurance is rarely worth the added cost to your policy. The exception is if you absolutely need a car for your livelihood and are worried about theft in your area.