Understanding the Difference Between Comprehensive and Collision Coverage

Drivers face a common conundrum when shopping for car insurance: they want to strike an optimal balance between affordability and completeness of coverage, but the sheer range of available options makes it time-consuming and confusing to compare policies. Carrying the bare required minimum will make your monthly premiums more affordable, but it will also leave you vulnerable to many risks that could result in major expenses.

Thus, many vehicle owners choose to purchase policies that provide some degree of added protection. Specifically, there are two types of car insurance that are optional in most jurisdictions but cover motorists in the event that their vehicle suffers physical damage that requires repair. These are comprehensive coverage and collision coverage.

Their names sound similar, but there are significant differences between these two types of car insurance. In this guide, we’ll explain how they diverge and examine situations in which they do and do not make good financial sense.

What is comprehensive coverage?

The term “comprehensive coverage” is somewhat misleading. “Comprehensive” suggests this type of insurance covers every possible thing that could happen to your car. However, its comprehensiveness is limited and actually covers pretty much everything except an accident or collision with another vehicle.

Comprehensive car insurance will cover loss or damage caused by:

Note that the “animal encounters” provision can vary among providers: some will only cover damage done by an animal when your car was not in use, while others will extend the protection to collisions involving only your car and an animal, such as a deer.

Also, note that comprehensive coverage generally does not include or cover:

What is collision coverage?

It is more or less accurate to think of collision coverage as a form of insurance that will reimburse you for most damage-related expenses not covered under comprehensive plans. In other words, collision coverage protects you from repairs to your own vehicle associated with:

Collision coverage does not include:

It also does not protect you against most of the perils associated with non-driving-related damage listed in the previous section.

When to consider comprehensive coverage

Comprehensive insurance is usually optional. There are exceptions: some auto dealers, banks, and lenders will require you to carry it in order to qualify for financing plans related to vehicle leases or purchases. This is particularly true of newer and/or higher-value automobiles.

It is often a good idea to carry comprehensive insurance anyway, even if you are not obligated to do so. This is particularly true if you:

Also, look carefully at local car theft rates and statistics, especially as they relate to the year, make, and model of the vehicle that you own. Comprehensive insurance is the main type of insurance that will reimburse you if your car is stolen. If you don’t have it and you’re at relatively high risk of having your car stolen, you’re leaving yourself vulnerable to a significant financial hazard.

When to consider collision coverage

Collision coverage is generally a wise idea, and most insurance professionals recommend that you carry it if you can afford it. Like comprehensive coverage, collision packages are usually optional, but they may be mandatory if you are leasing or financing your car through a bank, financial institution, or dealer-based lending program.

Even if you don’t have to carry it, collision coverage is a particularly good idea if you:

There’s also another situation to consider, and that’s one in which you may be able to skip collision coverage without much risk. If your car is fully paid off and it’s an older vehicle or not worth very much money for other reasons, collision insurance may not make financial sense.

Personal finance gurus usually use this rule of thumb: if the annual cost of optional forms of damage-related insurance coverage equal at least 10% of your car’s “book value,” then it probably isn’t going to provide value over the long run.

Can you buy one without buying the other?

Many insurance companies package their comprehensive and collision insurance together, selling them as bundled components of a complete policy. Furthermore, if a lender compels you to carry comprehensive car insurance to qualify for financing, they will also likely extend that requirement to collision insurance and vice-versa.

That said, insurance providers often allow customers to tinker with their policies and downgrade or cancel certain forms of coverage. Thus, depending on your carrier, you may be able to cancel either the comprehensive or the collision part of your insurance package while leaving the other intact.

However, remember that you’re generally better off to cover as many bases as possible with your car insurance. Thus, you can also consider other ways to manage or reduce your monthly costs, such as raising your deductible or scaling back your maximum coverage limits without affecting the scope of your policy.