Understanding all the insurance terms on your auto policy can be taxing. If you want to take a minute to review it in full, you can jump over here and check it out. I also wrote a post last month about understanding all the details of a deductible and how it works.
Today, I’m going to share the difference between your comprehensive and collision coverage. Each of these coverages are subject to their own deductible. This amount can be the same or different. You get to determine what you want your deductibles to be.
There are two important deciding factors that go into that decision.
1. How much do I want my premium to be?
2. What am I willing or able to pay before insurance kicks in after a loss?
The higher the deductible, the lower the premium. The more risk you’re willing to take on paying for a loss, the less the insurance costs. Likewise, the more the insurance is going to cover, the higher the premium you pay. Deductibles are typically sold in increments of $100, $250, $500, $1,000, and $2,000. The amount you pick will be what you owe before insurance pays toward a loss.
Comprehensive coverage is protection for your vehicle against damage which another human cannot be held liable for causing. This coverage comes into play for a number of different reasons. The most common are wildlife running into the road, stones cracking windshields while driving, and fire or theft. It is possible with most carriers to choose a deductible amount but then also a lower glass only amount. For example, you may choose to have a $500 deductible for comprehensive loss with just a $50 glass deductible for glass only claims.
Collision coverage is protection for your vehicle for accidents you are liable for causing. This would be applied if you hit a stationary object like a mailbox. As well as, if you crash into another vehicle. The deductible is the amount you owe to the body shop before the insurance pays the difference.
How is this paid out?
If you carry a $1,000 deductible and the damage to your car is only $700, the insurance would not pay anything. Suppose the damage to your truck is $5,500 and you carry a $500 deductible, the insurance will pay $5,000. In the unfortunate event the vehicle is totaled out and you have a $1,000 deductible while the blue book of your vehicle is $12,000, the insurance is going to cut you a check for $11,000.
It is important to get an estimate if you are unsure how minor the damage is before calling in a claim. If you hit a telephone pole and have a $500 deductible and the damage comes to $600, it would be worth paying the whole $600 yourself verses filing for just $100 pay out. Auto claims stay with you for 3-5 years, and a very minor loss would not be worth having on your score.