What is Collision and Comprehensive Auto Insurance

A number of drivers are wondering about the difference between collision and comprehensive auto insurance coverage. Both types of insurance protect the vehicle from physical damage but each type of coverage pays out for different types of losses.

If you take out a loan to finance the purchase of your car, you will probably need to keep full coverage (collision and comprehensive insurance) in place until it has been paid off in full. The company extending the loan will want to make sure that its interests are protected in case the car is totalled in an accident.

Collision Auto Insurance Coverage

Collision coverage pays for the cost of repairs to the vehicle following an incident where it hit another vehicle or an inanimate object. It also pays out when the damage was caused in a rollover accident.

Comprehensive Auto Insurance Coverage

Comprehensive auto insurance pays out when the damage to the vehicle was caused by an event other than a collision. This part of the policy covers you for the following types of losses:

  • Falling objects
  • Fire
  • Hitting an animal
  • Riot
  • Severe weather (Hail and flooding)
  • Theft
  • Vandalism
  • Wind

The collision coverage portion of the policy also covers the glass in the vehicle. If your windshield or window is damaged by a stone, the insurance will pay for the cost to repair or replace it.

Making a Claim under Collision and Comprehensive Coverage

When you make a claim to your auto insurance provider for physical damage to your vehicle, you are responsible for paying the policy deductible. This is the amount of money you have agreed to pay out of pocket toward settling the claim.

The higher the deductible you choose, the lower your premium rates will be. Policyholders who agree to pay a higher amount toward the cost of settling a claim personally present a lower level of risk to the auto insurance company. You will want to keep this in mind when you decide what deductible level is right for your needs and budget.

The insurance company will base its payout on the car’s cash value. If your car is totalled in an accident, the insurance company doesn’t write a check for its replacement value or even what you paid for it initially. If there is an outstanding loan on the car, the check is made out to the lender to pay off this amount.

If the cash value of the car is lower than the amount you still owe on it, you will be responsible for paying the outstanding amount of the loan. To avoid being in this situation, consider adding gap coverage to your auto insurance policy. This type of protection is put in place to make up the difference between the car’s cash value and what you still owe on it.

To get the best price on your collision and comprehensive auto insurance coverage, drivers should be prepared to shop around. Pricing for this type of coverage will vary, depending on the company providing the quote.