Learn about coverage limits, collision and comprehensive, deductibles and other important terms to help decide on how much is right for you and how you can save.
Continuing our series of helpful information to use when looking to purchase auto insurance, this month we discuss the topic of comprehensive and/or collision insurance.
Do I need comprehensive and/or collision insurance?
It depends. Collision coverage covers repairs to your car if you’re in an accident. Comprehensive coverage covers your car if it’s stolen or damaged by something other than a collision or rolling over. You might not have a choice to not carry this coverage if your car is leased or financed; most lenders will require you to carry enough coverage to cover the cost of repairs to your car.
If you own the vehicle, you could consider whether the savings from dropping collision and/or comprehensive coverage is enough to offset the risk of having to pay the entire cost of repairing or replacing your car. For example, if your car is totaled from an accident in which the other driver as at fault and has no insurance, hit in a parking lot while you were in the store shopping or stolen from while you were hiking at a park, do you have the means to replace it without any help from the insurance company?
If your car is older and not an antique, it might be time to drop the collision and comprehensive coverage and put that money into savings. You can take the cost of collision and comprehensive coverage and see if the insurance policy cost more or the same as the worth of your vehicle. If so, it might be time to drop the coverage. For example, if your car is worth $1,000 and your coverage costs $500 a year plus a $500
deductible, you’re not really getting anything for your money.
How much should my collision and comprehensive deductibles be?
This is a balancing act. Higher deductibles typically lower your premium but will increase your out-of-pocket costs if a loss occurs. Ask yourself how much you’re willing and able to pay directly, often on short notice, to potentially save on your premium. If you want to lower the amount you have to pay when a crash occurs, you might want to opt for a lower deductible.
If saving money on your insurance is your motivating factor behind removing your
collision and raising your deductible, consider these other car insurance money savings
tips.
- Bundling: Check with your insurance company about choosing to combine the purchase of your home insurance or renters insurance with your auto insurance.
- Insurance ratings: When purchasing your vehicle, consider how the insurance company will rate them. Some cars cost more to insure than others.
Consider sharing your driving information: Programs like Drive Safe & Save™ from State Farm put you in control of your discount.
