Auto Insurance Vs. Collision Coverage: Understanding The Key Differences

Auto insurance is a broad term for insurance coverage for your vehicle, and collision coverage is a specific type of auto insurance. Collision coverage helps pay for the cost of repairs to your vehicle if it's hit by another vehicle, or if you hit another vehicle or object. Unlike liability insurance, collision coverage applies even if you are found at fault. Collision coverage is not required by law, but it is often required by lenders or leasing companies. It is also referred to as full coverage.

What is the difference between auto insurance and collision coverage?

Collision insurance covers accidents involving objects or vehicles, but not non-collision damage

Collision insurance covers damage to your vehicle in the event of a collision with another vehicle or object. This includes repairs or a full replacement of your covered vehicle. It's important to note that collision insurance only covers damage to your car and not to other vehicles or objects involved in the accident. Additionally, it does not cover bodily injuries sustained during the collision.

While collision insurance covers a wide range of accidents, it is important to understand its limitations. For example, collision insurance will not cover damage to your car resulting from non-collision events such as natural disasters, theft, or vandalism. In these cases, you would need comprehensive insurance, which complements collision insurance by covering non-collision-related damages.

Some examples of situations where collision insurance would apply include:

• Accidents involving only your car, such as rolling over.
• Accidents with stationary objects, such as telephone poles, fences, curbs, or guard rails.
• Accidents with other vehicles, regardless of who is at fault.
• Hit-and-run accidents, where the responsible party flees the scene.

It's worth noting that while collision insurance is not required by law, it is often required by lenders or leasing companies if you are financing or leasing your vehicle. Even if your vehicle is paid off, collision insurance can provide valuable protection against unexpected costs associated with repairing or replacing your car after a collision.

Comprehensive insurance covers non-collision damage, like natural disasters or theft

Comprehensive insurance covers damage to your vehicle caused by incidents that are not collisions. This includes damage caused by natural disasters, such as earthquakes, floods, hurricanes, tornadoes, and volcanic eruptions, as well as theft of the entire car or parts of it, and contact with animals. It also covers damage caused by fallen objects, such as trees, branches, ice, or projectiles. Comprehensive insurance is particularly useful if you live in an area with a high risk of damage due to fallen branches or animals crossing the road.

Comprehensive insurance is optional, but nearly four out of five drivers choose to purchase this coverage. It is significantly cheaper than collision coverage, costing on average a little over $134 per year. If you are financing the purchase of your car, your lender may require you to purchase both comprehensive and collision coverage to protect their investment.

While comprehensive insurance covers damage to your car from non-collision incidents, collision insurance covers damage to your car from collisions with other vehicles or objects, such as a tree or a lamppost. Collision insurance also covers you if your car rolls over or is damaged by a pothole. Unlike liability insurance, collision insurance covers you even if you are found at fault. Collision insurance will pay for repairs to your car, minus your deductible.

Collision insurance is optional, but often required by lenders

Collision insurance is optional but often required by lenders. While collision insurance isn't required by state law, it's always a smart option. With so much on the road that you can't control, do you really want to risk paying thousands of dollars out of pocket for damage to your car after an accident? If you are leasing your vehicle or making payments, your finance company may require that you purchase both collision coverage and comprehensive coverage. Check with your auto lender about whether collision coverage is required.

Collision insurance is particularly important for new drivers, such as teens, who have less experience on the road. It's also important for those who drive more, especially on roads with higher volumes of traffic. If your risk is higher, you'll want to make sure you're protected with collision insurance. Collision insurance is also a good idea if you don't have sufficient savings to pay the cost of repairing or replacing your car out of pocket.

If you own an older vehicle, you may end up paying more in premiums than your car is actually worth. Choosing not to purchase collision coverage leaves you financially responsible for repairing or replacing your vehicle in the event of a collision. However, if you own an older vehicle that has maintained its value, collision coverage is worth considering.

Collision coverage helps pay for the cost of repairs to your vehicle if it's hit by another vehicle, or if you hit another vehicle or object. That means you can use it whether you're at fault or not. Collision insurance covers a wide range of accident types, including accidents involving only your car, such as rollovers, and accidents with another object, such as a phone pole or a guard rail, or another vehicle.

Unlike some coverages, you don't select a limit for collision. The most it will pay is based on the actual cash value of your vehicle, minus your deductible. You will be responsible for paying your selected deductible. A collision deductible is the amount you've agreed to pay before the insurance company starts paying for damages. Typically, the more risk you're willing to take (higher deductible), the lower your insurance cost. The less risk (lower deductible), the higher your insurance cost.

Comprehensive and collision insurance are complementary and often purchased together

Comprehensive and collision insurance are two distinct types of auto insurance that are often purchased together to provide more complete coverage. While collision insurance covers accidents involving objects or other vehicles, comprehensive insurance covers other types of damage, such as theft, hitting an animal, natural disasters, and civil disturbances. Comprehensive insurance serves as a complement to collision insurance, ensuring that a wide range of potential incidents are covered.

Comprehensive and collision insurance are designed to protect your vehicle from different types of damage. Collision insurance specifically covers accidents involving collisions with objects or other vehicles, regardless of fault. This includes a diverse range of scenarios, such as single-car accidents, at-fault accidents, not-at-fault accidents, hit-and-run incidents, and rollovers. On the other hand, comprehensive insurance focuses on damage caused by incidents other than collisions. This includes events like theft, vandalism, fire, natural disasters, and animal collisions. By combining these two types of insurance, individuals can ensure they have financial protection in a wide range of situations.

The decision to purchase comprehensive and collision insurance together is often influenced by several factors. One key consideration is the value of the car. If an individual has a high-value car, the cost of repairs or replacement can be significant, making the purchase of both types of insurance a prudent choice. Additionally, those who drive more frequently, especially in high-traffic areas, may be more likely to encounter accidents and will want the added protection of both comprehensive and collision coverage.

Another important factor is an individual's current savings. If a person does not have sufficient savings to cover the cost of repairing or replacing their vehicle out of pocket, purchasing both types of insurance becomes essential. This is particularly relevant for drivers in areas with higher risks, such as regions prone to natural disasters or areas with frequent reports of vehicle damage due to fallen branches or animals on the road.

In some cases, lenders or leasing companies may require individuals to carry both comprehensive and collision insurance to protect their investment. This is especially true for newer vehicles or those that are being financed or leased. While collision insurance is not legally required, it is often a smart financial decision to ensure that unexpected costs associated with vehicle damage or repairs do not become a financial burden.

Collision insurance covers the cost of repairs or replacement, minus your deductible

Collision insurance covers the costs of repairing or replacing your vehicle after a collision with another vehicle or object, minus your deductible. This means that if your vehicle is damaged in an accident, you will need to pay the amount you agreed to pay before your insurance company starts paying for the damage—your deductible—and your insurance company will cover the remaining costs. For example, if you have a $250 deductible and your vehicle sustains $1,000 worth of damage, you will pay $250 and your insurance company will pay the remaining $750.

The amount of your deductible is up to you. Typically, the higher your deductible, the lower your insurance cost will be, and vice versa. For example, if you choose a higher deductible, you will be taking on more financial risk in the event of an accident, but your insurance premiums will be lower. On the other hand, if you choose a lower deductible, you will be taking on less financial risk in the event of an accident, but your insurance premiums will be higher.

It is important to note that collision insurance only covers damage to your own vehicle. It will not cover damage to other vehicles or property, or bodily injuries sustained in the accident. Additionally, collision insurance will not cover damage to your vehicle from non-traffic events, such as theft, extreme weather, or running into a deer.

Frequently asked questions