Full insurance coverage is a combination of comprehensive and collision insurance on a vehicle. Collision coverage pays out if the car is damaged by either hitting or being hit by another vehicle. It also protects the vehicle owner if the car is damaged by an object.
When a car owner is getting a loan to help pay for the cost of a vehicle, the lender will usually require that collision coverage be put in place. As long as there is money owing on the car, the lender will usually insist that the collision coverage be in place. If the car is totaled in an accident, the benefit will be paid to the lender to satisfy the loan first.
Comprehensive coverage pays out if the loss is due to other causes. For example, if the vehicle is damaged by an act of vandalism or is stolen, this type of policy will compensate the owner. It also pays out if the damage is due to wind or hail damage.
Gap insurance is another coverage option that a vehicle owner should consider. It is put in place during the first few years that an owner has his or her new vehicle. This coverage pays the difference between the vehicle’s cash value and the amount of the balance owing on the financing loan. A vehicle owner who doesn’t have gap insurance would have to pay the difference him or herself.