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Understanding Coverage: Part 2 – Comprehensive vs. Collision

Collision and comprehensive coverages are important to have if you want coverage for damage to your own vehicle. In part two of our five-part series on understanding coverage, learn the ins and outs of what’s covered by each.

What does comprehensive coverage include?

When it comes to comprehensive vs. collision coverage, it’s important to know the different types of losses that each applies to. Comprehensive car insurance, also known as other-than-collision coverage, pertains to physical damage to your auto from fire, theft, vandalism, flood and more. For example, if your car is submerged in a rainstorm, or it’s damaged in a hailstorm, these instances would likely be covered under comprehensive car insurance. In some states, an animal, such as a deer, hitting your car is also covered under the comprehensive portion of your policy. 

What does collision coverage include?

Collision coverage pays for damage to your vehicle that occurs from impact with another vehicle or object. For example, if you hit a tree or another vehicle, these instances would likely be handled under collision coverage. Also, if your car rolls over, whether or not it collided with something, these instances would likely fall under collision coverage.

Do I need comprehensive and collision insurance? 

There are a few things to consider in determining if you should have comprehensive, collision or both.

The value of your car

Unlike liability insurance, comprehensive and collision coverages aren’t required by law, so the decision to have them is usually up to you. One scenario where you may need to have these coverages is if your car is leased or financed. In these cases, your lender will likely require you to carry both comprehensive and collision coverage, with a specific deductible, to ensure their financial interest in the vehicle is protected. But in more instances than not, it’s wise to have comprehensive and collision coverage to protect yourself from sudden and accidental car losses.

If you have an older vehicle, it may not make as much sense to have comprehensive and collision coverage compared to if you have a new car. This is because the cost of carrying these coverages on your car insurance policy over time may exceed the payout you would get in the case of a collision or comprehensive coverage loss. On the other hand, if you have a brand-new car, the cost to have these coverages on your insurance policy would probably be minimal compared to the cost of having to pay out of pocket to repair or replace your car. 

Likelihood of a loss

If you drive a lot, particularly on high-traffic or winding roads, you may be more likely to get into an accident. And if the chance of getting into an accident with another vehicle is higher, collision insurance is a good option to help cover these potential losses. Similarly, comprehensive coverage could be worthwhile if you regularly park on the street or leave your car unattended for long periods.

Your financial appetite

One of the main purposes of insurance is to reduce financial uncertainty and make accidental loss manageable. If you’re comfortable with being responsible for repairing or replacing your vehicle due to a loss, then perhaps you don’t need comprehensive or collision coverage. However, this can be a large financial burden if you do experience a loss, so it’s important to thoroughly weigh the risk of not carrying these coverages.

Your location

Your daily surroundings can have an impact on your decision to carry comprehensive and collision coverage. If you live in a densely populated area or commute into a populated city, carrying collision coverage may be in your best interest, as the chance of getting into an accident may be higher. If you live in an area with a greater chance of wildfires or hail, that may be a good reason to carry comprehensive coverage.

Comprehensive and collision coverage deductibles and limits

When you purchase comprehensive and/or collision coverage, you select a deductible for each coverage. You can have the same deductible for both coverages, or they can vary. For example, if you think it’s more likely that you experience a comprehensive loss than a collision loss, you could have your comprehensive deductible be lower than your collision deductible.

Let’s say you choose a $500 deductible for collision coverage and you hit a light post in a parking lot. The total damage comes out to $2,000. You would pay your $500 deductible toward the damage to your vehicle, and your insurance carrier would pay the remaining $1,500.

You may have noticed there isn’t a limit listed for comprehensive or collision coverage on your Declarations Page. This is because there isn’t a predetermined limit for these coverages. If your vehicle is involved in a covered loss and damaged beyond a specific threshold, which varies from state to state, it would be declared a total loss. In this case, the amount paid for the claim is typically determined by calculating the actual cash value (ACV) of your vehicle. The ACV is how much your vehicle is worth, minus how much it’s depreciated. To determine your car’s ACV, insurance companies typically use a variety of factors such as its age, condition, mileage, resale value and the selling price of other similar vehicles in your area.

We know that everyone’s insurance needs are unique. If you’d like to learn more about which coverages are right for you, an Amica representative would be happy to discuss your options with you. 

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