People often confuse these two types of Pennsylvania automobile coverage. Simply put, collision insurance coverage pays to repair the damage done to your vehicle in an accident. Comprehensive coverage pays for damage to your car that does not come from an automobile accident.
While liability insurance is required in most states, collision insurance coverage is optional. You don’t have to buy this coverage, but without it, you will have to pay the entire cost to repair your vehicle. If your vehicle is a total loss due to an accident, then the cost to you would include a new car plus the expense of paying off the loan on the totaled car, if it was financed. Most finance companies require that you carry collision coverage when you finance the purchase a new car.
Collision insurance comes with what’s called a deductible. The deductible is the amount of money that you need to spend out of pocket, before your collision coverage takes effect. When you are in an accident, you will need to file a claim and have the car examined by a mechanic. You’ll get an estimate for repairs; subtract the amount of your deductible, and the remainder of the cost will be paid by your insurance company. For instance, if the repair estimate is $1700 and you have a $500 deductible, then once you pay the first $500, the insurance company will pay the remaining $1200 to have your car repaired.
Generally, the higher your deductible is, the lower your premium will be. The premium is the amount that you pay for collision insurance coverage. While opting-out of collision insurance may look like a good savings on paper, the short-term savings are not worth the risk in today’s market. Cars are a major financial investment and accident repairs can be prohibitively expensive. When deciding on what type of collision coverage you will purchase, you should take into account how high a deductible you can afford, and the age of your vehicle. In the event your car is a total loss, collision insurance will pay you the current “Blue Book” value of the car, not what it will cost you to replace it. The older the car, the lower the Blue Book value will be. Any car that has a Blue Book value over $4000 should have collision coverage. Once the Blue Book value of the car drops below $4000, it may be cheaper to purchase a new car, rather than pay the cost of the collision insurance premiums and repairs in the event of an accident.
Comprehensive Insurance Coverage
Comprehensive insurance will protect your car against the automotive version of Murphy’s Law, “whatever can go wrong, will go wrong.” This includes acts of nature and other calamities such as:
- Hurricanes, earthquakes, tornadoes.
- Theft and vandalism.
- Falling objects.
- Collisions with animals, such as hitting a deer.
- Breakage of glass, this includes replacement of your windshield.
- Hail, water, or flood.
The actual events that are covered can vary from carrier to carrier, so you need to check with your insurance agent to find out the specific coverage for your policy.
Why do I need it?
Like collision insurance, comprehensive insurance coverage is optional, not mandatory. The exception may be if your car is new, still financed, or leased. In those cases, the lender or leasing company may require that you carry comprehensive insurance coverage. Even if it is not mandatory in most cases, the need for it is obvious. Without comprehensive insurance coverage, any and all damage done to your vehicle, from a ding in the windshield to complete loss from a falling tree, is completely your financial burden. This could end up being thousands of dollars out of your pocket. Having comprehensive coverage relieves you of that worry and unplanned expense.
Like collision insurance, comprehensive coverage includes a deductible. The higher your deductible is, the lower your premium will be. The premium is the amount that you pay for the coverage. Your deductible can range from $0 to $5000 or more. A higher deductible will cost you less in premiums, making it a very appealing option. However, in the event of an accident, that high deductible can put a substantial dent in your pocketbook. The deductible must always be paid first, before the comprehensive insurance coverage will kick in to pay the balance.