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Car Insurance: Do You Need Collision and Comprehensive Coverage?

As premiums for our car insurance seem to soar ever higher each year, most of us are always on the hunt to shave a few bucks off those costs. Owning your car outright – or, in other words, it’s paid off and you have the title – affords you some freedom in picking and choosing your coverage.

Liability is the insurance that most states require we carry in order to register a car. It covers injuries and damages to other parties and their property. If you want to register your car in those states, you must have it. Unfortuanately, its cost represents the lion’s share of the average car insurance premium.

Although there are areas where you may be able to trim some cost, such as uninsured motorist, towing and car rental, eliminating these won’t put much of a dent in that annual premium. After liability, the bulk of your premium goes to the two Cs of car insurance: collision and comprehensive.

If you own your car outright and have the title, you can drop one or both of the Cs. But, beware. There is more to consider than just saving a little money on the premium to consider when thinking of dropping one or both of these types of insurance.

Collision Versus Comprehensive Insurance

Collision insurance pays for repairs to your car when it comes in contact with another vehicle or stationary object, such as a guardrail, tree or light pole. Usually collision insurance kicks in for incidents for which you are at fault; although, in the cases of damage caused by an uninsured or hit-and-run motorist, your collision insurance would pick up the slack.

Comprehensive insurance is a bit misleading because it doesn’t cover every sort of damage to your car, as the term implies. Instead, it pays for damage to your car that’s not caused by the actions of a driver: either you or someone driving another vehicle. Damage from a mudslide, rock slide or hail storm would all be covered by comprehensive insurance.

If you drove into a tree, that would be covered by collision insurance; if a tree fell on your car, that would be covered by comprehensive insurance. Although a lender will insist you carry both Cs, you are free to drop one or both if you own your car.

That Dirty Deductible

Unlike liability coverage, both collision and comprehensive coverages have a deductible, which is the amount of a claim that you will pay out of your own pocket, leaving your insurance provider to pay the balance. If the deductible is $500, and you file a collision or comprehensive claim for $2,000, you will pay the first $500, and your insurance provider will pick up the remaining $1,500.

When Does Dropping Collision and Comprehensive Make Sense?

If you do own your car, you only have to carry state-required liability insurance. So why not just drop the collision and comprehensive, and save some money, right? Maybe.

The key to this decision is knowing the market or book value of your car. The older your car, the less it’s worth and the more likely your insurance company will total it out if you file a claim. This means that they will junk your car, paying you its market value minus your deductible.

You must also know how much of your insurance premium goes to pay for each type of coverage and do some math. If you can comfortably afford to lose your car’s cash value, or equity, in the case of a complete loss, you might decide those collision and comprehensive premiums would serve you better going into savings, or helping you pay off bills. However, if you are on a tight budget and would need your car’s equity as a down payment on a replacement car, you might not want to roll the dice by dropping coverage.

What It Means to You

Let’s face it, car insurance is one of those things that we pay for that we hope we’ll never have to use. If you can’t afford to take care of collision repairs to your car or replace it without whatever its cash value might be, it’s probably smart to continue paying those collision and comprehensive premiums.

 

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2 COMMENTS

  1. This is a misinformed article.  As to WHAT YOU NEED.
    1.  Need to start with the term “FULL COVERAGE.”  If you ask for this, understand you will get FOOLS coverage.  If you have an agent that uses this term run from that agent.  They are idiots.
    Take for example Oklahoma, there is a case that defines FULL COVERAGE, as that coverage required by the Financial Responsibility Act.  Which is 25/50/25 liability.  NO OTHER COVERAGE.
    2.  COMP/COLL (Or Physical Damage Coverage for Your Covered Auto)  Varying deductibles.  This is what amount of risk do YOU want.  COMP aside, there are 25% of the driving public that are uninsured.  In an accident with one, you will want or wish you had this.    If the value of your veh. is 6K or less, you may wish to accept this  much risk of a loss.  The cost of COMP/COLL is usually higher on older cars as they will most likely be a total loss if in an accident.
    3.  MED PAY –  Use this once it pays for itself the rest of your life.  Get the largest limit you can afford.  It pays for your medical bills (and anyone in your veh.) regardless of fault, up to the policy limit.  I carry 10K as this is the max. coverage my company offers.
    4.  Liability.  Minimum vs higher.
    I carry 100/300/100.  Think how many cars are worth over the minimum limits, and in MO you can by 10K of property damage coverage.
    There are other issues, but for the most
    The real reason to get as high of a limit as possible is for the UM and or UIM coverage.  Explained further in 5.
    5.  UM or UIM.  Uninsured Motorist vs Under Insured Motorist.
    Most states (all actually I believe except for the PIP ones) mandate this coverage cannot exceed your liability limit of coverage.
    UM  = When you are legally entitled to recover from an uninsured motorist.  Remember at any given time 25% of the drivers are not insured.  Some are (usually the young and bad drivers) are NAMED EXCLUDED PERSONS OR DRIVERS). 
    UIM = When you are legally entitled to recover from someone that has inadequate limits to pay for your damages.
    Remember those minimum limits which may be 25/50 or 30/60?  If you are hurt severely your injury may exceed the minimum limits easily.  If 25% are uninsured and say 40 – 50% carry the minimum there is a 65 – 75% chance you could be involved with one of these types that could trigger UM/UIM coverage.
    Consider if there are more that 2 hurt in n accident. Such as multiple vehicles maybe 3 or 4 or 5.  Then that 2nd number becomes say 50K divided by 3 or 4 or 5.
    I carry the said UM/UIM coverage as liability of 100/300 because I do not trust the others on the road.
    Oh, and in Oklahoma UM/UIM is all rolled into one. As the definition of an uninsured motorist is
    1.  A motorist that does not have insurance.
    2.  They have inadequate limits to compensate you for you damages.
    3.  The company is in receivership.
    I am not a lawyer but I am a 35 year adjuster.  I know the DEAL
  2. Thanks for the heads up, (on a pretty serious subject) while many of us wish insurance were cheaper, but somehow know it cant be, and probably never will be. In hindsight, its better to pay a little extra for the insurance and sleep at night. Thanks again for these articles, they are appreciated.

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Russ Heaps
Russ Heaps is an author specializing in automotive, financial and travel news. For nearly 35 years he has covered the automotive industry for newspapers, magazines and internet websites. His resume includes The Palm Beach Post, Miami Herald, The Washington Times and numerous other daily newspapers through syndication. He edited Auto World magazine, and helped create and edit NOPI Street Performance Compact magazines. He supplied financial content and automotive-industry analysis to Bankrate.com and Interest.com.

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