21 Dec Comprehensive vs. Collision Auto Insurance: A Guide for Veterans
A contract between an insurance company and a policyholder is called an auto insurance policy. As defined in the insurance policy, the policyholder becomes responsible for paying the premium while the insurance company pays the losses.
Most states require drivers to have auto liability insurance before they can legally drive a car. In all states, there are laws requiring drivers to carry minimum insurance or otherwise secure their financial well-being in case of an accident resulting from their negligence. Automobile policies tend to last six to twelve months. There are six different kinds of coverage in a typical auto insurance policy. Each one is priced separately.
Related Article: How Veterans Auto Insurance Works
Different Types of Auto Insurance
Bodily Injury Liability
Policyholders and their family members are covered for injuries they cause to others. The same is true when they drive other people’s vehicles. Motorists involved in serious accidents may be liable for a considerable sum of money, so they can choose to buy more insurance than the minimum required by their states to protect such assets as their homes and savings.
Medical Payments or Personal Injury Protection (PIP)
His coverage covers injuries to the policyholder’s car’s driver and passengers. PIP covers medical expenses, lost income, and the costs of replacing services typically performed by someone injured in an auto accident.
Property Damage Liability
A policyholder (or someone driving the car with their permission) may cause damage to someone else’s property under this coverage. It usually includes damage to someone else’s vehicle but can also include lampposts, telephone poles, fences, buildings, and other structures hit during an accident.
What Is Comprehensive Insurance, and What Is Collision Insurance?
This coverage pays for damage done to a policyholder’s car when it collides with another vehicle, object or when it flips over. This coverage also covers potholes.
The higher the deductible, the lower the premium for collision coverage. Generally, collision coverage has a deductible between $250 and $1,000.
If the policyholder is not at fault, the insurance company may try to recover the amount it paid from the other driver’s insurance company. If the company is successful, it will also reimburse policyholders for the average car insurance deductible.
In addition to losses due to collisions with other vehicles or objects, comprehensive insurance covers damage caused by fire, falling objects, explosions, earthquakes, windstorms, hail, flooding, vandalism, etc. Policyholders may choose to raise their deductibles to lower their premiums if they purchase comprehensive insurance with a $100-300 deductible. Glass coverage is available from some companies with or without a deductible.
Related Article: If My Car Breaks Down, Will Insurance Cover a Rental?
Cost of Comprehensive vs Collision Insurance
The cost of comprehensive and collision insurance depends on factors such as where you live, your driving record, your age, marital status, and credit score.
ACV vs. Replacement Value: The Cost Difference
Your insurance company may use several different methods to determine the amount it will pay you if you have a loss.
A payout based on the replacement cost of damaged or stolen property is generally the most favorable figure from your perspective because it compensates you for your actual losses. Insurers won’t consider that you ran three rolls of film through the camera every day for the last two years, causing substantial wear and tear.
Depreciation is subtracted from replacement cost to determine actual cash value (ACV). ACV, or real cash value, is the method that insurance companies use when reimbursing consumers for losses. In other words, it is what you might expect to get if you sell the item on the market.
What Does “Replacement Cost” Mean?
The policy defines or explains what is meant by “replacement cost.”. It is the cost to replace the property on the same premises with another parcel of comparable quality and material used for the same purpose.
There is no exception to this rule unless the insurance limit or the cost of repairing or replacing the damaged property is less.
What Is “Actual Cash Value”?
There is no simple definition for “actual cash value.” Depending on the court, the term may mean “fair market value,” or the amount a buyer would pay a seller if neither party were under undue time constraints. Courts have generally upheld the traditional definition of insurance: the cost of replacing the property with a new one of like quality and kind, less depreciation. Depreciation is often ruled to include obsolescence (loss of usefulness due to outmoded design, construction, etc.).
So What’s the Difference?
A depreciation deduction is the only difference between replacement cost and actual cash value. Nonetheless, both are based on the cost to replace the damaged property with a new one today.
Who Should Get Comp Coverage, and When It Makes Sense?
Having comprehensive auto insurance is essential coverage because, without it, a driver will not be insured for many things that can go wrong with their vehicles.
Who Should Get Collision Coverage, and When It Makes Sense?
It sounds like collision insurance will cover everything, but it won’t. Collision coverage pays to repair your own vehicle’s damage when you hit another car or an object like a lamppost or fence. Another driver hitting your vehicle may also be covered if their insurance isn’t enough to cover the damage.
The state doesn’t require collision insurance, but lenders usually require it if you finance or lease a car.
When to consider getting both coverages for “full coverage.”
Full coverage insurance includes collision, comprehensive, and liability insurance. Limited liability insurance is usually the only requirement in most states. The Zebra notes that you may not be required to have full coverage by law, but it does prevent a sizeable out-of-pocket loss in case of a collision.
Be careful to read the fine print about add-on policies like pet injury coverage, accident forgiveness, and gap insurance. Costs, terms, and conditions can differ significantly between insurance companies. You should enter the same driver, car, and address information every time you obtain a quote.
How to Save on Car Insurance Costs
The cost of car insurance is inevitable, and it is both thoughtful and prudent to have adequate coverage. Fortunately, premiums can vary by 100 dollars, depending on many factors. Ensure your insurance coverage is in line with your needs at renewal time.
Driving safely is one way to lower your car insurance rates. With at least five years of safe driving, you could qualify for a more affordable car insurance rate. You should also maintain a clean driving record and avoid tickets for speeding, reckless driving, and other violations.
Veterans and active duty service members may qualify for special military auto insurance discounts. Many carriers offer discounts to military families. In addition, all drivers are eligible for available discounts. Bundling home and auto policies, maintaining a good credit score, and keeping a clean driving record can help you save more.
When you insure more than one vehicle or purchase two types of insurance from an insurer, you may qualify for a discount. Longtime customers may be eligible for a price reduction.
Buying insurance individually from different companies with multi-policy discounts if you do your homework and compare the costs.
It pays to shop around since prices vary from company to company. Compare quotes from at least three insurance companies, i.e., direct to consumer, independent agents, and companies that sell directly online, through mobile apps, or via telephone.
Do your due diligence by researching the company before committing, and ask friends and relatives for recommendations.
The cheapest option isn’t always the lowest price. Choose a reputable insurance company, and make sure you are comfortable with the service you receive.
You can find information on consumer complaints by companies by contacting the state insurance department or searching online.
Should You Buy Comprehensive vs Collision Insurance?
For most motorists, comprehensive and collision coverage both provide adequate protection, so let’s look at what they do.
In an accident caused by the policyholder, collision coverage pays for damage to the policyholder’s vehicle. Drivers without collision coverage would be on their own to pay for the repairs to their cars or replace them if the damage was beyond repair.
In general, collision and comprehensive coverage cover the majority of car problems. Drivers without either type of coverage would be responsible for covering all costs on their own for problems not caused by another driver who is held liable for their losses.
If you can’t afford to pay out of pocket for a brand new car if your car is totaled and cannot be repaired, you should buy both collision and comprehensive coverage.
These types of coverage are not recommended for drivers with low-value vehicles. The reason for this is that deductibles are often required, meaning the driver must spend some money out of pocket before insurance takes care of the rest.
When a policyholder’s car is worth $2,000, and the deductible is $1,500, buying collision or comprehensive coverage may not make sense.
The insured driver would still only receive $500 from the car insurance company even if the car was totaled. A $500 payment may not make financial sense if you pay insurance premiums for months or even years.
Drivers must decide whether it makes more sense to pay out of pocket for vehicle repair or replacement or to pay premiums to transfer those risks to the insurance company.