Having a bit of knowledge about how auto insurance works is one of the best ways to guarantee that you get a great rate. While there are many small tips and tricks that can save you a few dollars here or there, the largest savings come from simply selecting the best insurance coverage for your particular needs. This will help to make sure that your monthly payments aren't more than they need to be while also ensuring that an accident doesn't leave you high and dry. When it comes to designing the perfect coverage for your car, two of the most important decisions you make will involve comprehensive and collision coverage.
Who Insurance Really Covers
Most states are at-fault insurance states. What this means in practical terms is that the insurance you are required to carry by law exists to protect other drivers. This type of basic coverage is known as liability, and its purpose is to cover damage that you cause to others' property as well medical bills that result from any accidents where you are found at fault. If you carry only liability coverage, then your insurance will not pay for damage to your own vehicle in the event of an accident.
Of course, this can potentially leave you in a serious predicament following an accident. If you are at fault for an accident, then your liability coverage will not provide you with money to repair your car. This is where both collision coverage comes in.
What Is Collision Coverage?
Collision coverage is an additional option that you can add to a standard auto insurance policy. Where liability coverage reimburses other people for damage to their property, collision coverage reimburses you for damage to your car. If you cause an accident, then you will either need to pay for the damage to your own car out of pocket or you will need to have collision coverage.
Additionally, collision can protect you against minor damage where fault cannot clearly be proven. For example, if your car is damaged or dinged in a parking lot, then your collision coverage can be used to pay for repairs. Of course, many car owners opt for collision deductibles of $250 or more, so very minor damage is often not worth claiming.
What About Comprehensive Coverage?
Collision coverage helps to pay for damage from accidents, but it doesn't help you if your car is damaged in some other way. This is where comprehensive coverage comes in to fill in the gaps. Comprehensive policies protect you from damage from vandalism, weather events, etc. Comprehensive is often cheaper to add than collision coverage, but many insurance companies will refuse to sell comprehensive without collision coverage added on as well.
Which Should You Buy?
When deciding whether to buy collision and comprehensive coverage, there are two general rules of thumb:
Finally, keep in mind that many lenders require owners to hold both policies. In other words, if you have a car loan, you may have no choice but to carry both collision and comprehensive.