Owning a car and driving is a privilege. With this privilege comes a lot of responsibility. One such responsibility is carrying car insurance. This is to protect not only the driver and their property, but other drivers and property as well. While not everyone does carry insurance when they drive, that doesn’t mean you should be one of them.
Car insurance comes in many different forms with many different price ranges. There are a few scenarios which will help you decide what type of coverage will work best for your situation. You should always speak with a car insurance provider to help you decide what coverage is best.
When car insurance is discussed, most think of comprehensive and collision insurance. Both are great options for most drivers as they protect your property when it comes in contact with damage. The big difference between the two is the source of said damage. Here are some points about both coverages along with how to make sure you get the right coverage.
Collision Insurance Coverage
Collision coverage does just as its name states. It protects you in the event of a collision. Your collision coverage will pay to have your car repaired or replaced after it comes in contact with another car or stationary object. You will also be protected if your car is hit while it is parked, such as in a parking lot or on a street.
The rate you pay for collision coverage depends on a few factors. The main factor is the actual cash value (ACV) of your car. This takes into account the price of the car when you purchased it minus depreciation and your deductible. You can choose what deductible you want to pay, but generally it ranges between $0 and $1,000. The higher your deductible, the lower the price for collision coverage. Remember, your deductible is what comes out of your pocket before insurance kicks in.
Collision coverage is not mandatory, but it can be very helpful in the event of an accident. This coverage will replace your car if the insurance company considers it totaled. This happens if the repair cost is more than the actual cash value. Most insurance companies will provide you with a payment up to the ACV. If your vehicle is not worth much and has a value close to your deductible, then collision coverage might not be worth it to you.
This coverage sounds like it will take care of everything. Unfortunately, it doesn’t do that. Comprehensive coverage will only come into play when your car is damaged by specific events or theft. Such damages include:
- Hitting an animal
- Falling objects
- Specific natural disasters
- Glass damage
Comprehensive insurance is not the “everything” insurance some make it out to be. This coverage is best when you know you might encounter issues with animals, theft, or repeated damage from the other items listed. One of the most common uses for comprehensive insurance is a broken windshield.
Comprehensive insurance also comes with a deductible. This might be smaller than your collision insurance, such as not having to pay anything when your windshield is broken. The higher your deductible, the lower your payments.
There are currently no states that require you carry comprehensive insurance. This is just an add-on coverage, but is typically bundled with collision, uninsured, medical, and other insurance types. Most leased vehicles are required to carry comprehensive insurance, but that is dictated by the leasing company. They will also set the limits and deductibles you are required to carry.
How to Choose and Save on Insurance Coverage
When it comes to choosing collision and comprehensive coverage, it really comes down to your need. You should always check your state insurance requirements to see if any of these coverages are necessary. You should also make sure what is required if you have a loan or a lease. One of your main considerations should revolve around carrying these coverages if your car’s value is really low.
Once your car’s actual cash value comes close to your deductible, then this coverage might not be necessary. If you have a $1,000 deductible, then you have to pay that before your insurance kicks in. If you have a car with an actual cash value of $1,500, then it might not be wise to carry one or both of these coverages. You can take the amount you would pay and put it in a savings account. That money can then be used to either repair or toward the replacement of the vehicle without increasing your monthly payment.
No matter what insurance coverage you choose, the best way to save on any insurance is to compare costs between multiple providers. CARCHEX offers a helpful tool which allows you to check insurance quotes from multiple providers. By pitting insurance companies against each other, you can see which one will provide you with the best deal for the same coverage. You should always shop around for car insurance to get the best rate. A best practice is to shop around every time your auto insurance is up for renewal. This ensures you are paying the best rate each and every year.
It is important to remember both comprehensive and collision insurance only protect your vehicle from damage or theft. It does not pay for damages to other vehicles. This is covered by other coverage plans.
About The Author
Grayson Bell is a freelance writer who loves technology, finance, DIY, and Jeeps! When he is not running his business, iMark Interactive, he focuses on doing random home improvement projects and cruising the back roads in his Jeep Wrangler. He runs several personal finance blogs along with assisting other bloggers manage their sites from a technical perspective. You can follow him on Twitter and Google +.
Published in CARCHEX Auto Insurance Resources by CARCHEX on November 11, 2014