Collision and comprehensive coverage, each of which is available separately under an auto insurance policy, pays for the repair or replacement of your car for events specific to each. Collision and comprehensive coverage are known collectively as ‘physical damage coverage.’
Collision coverage will pay for the repair or replacement of your car if you collide with another object such as a car, a fence or a tree, or if another object collides with you, irrespective of who is at fault. For example, it would cover you if you drove into another car, or if another car drove into you, and it would cover you regardless of whether your car was stationary or not, or had occupants or not.
Comprehensive coverage, also known as other-than-collision coverage, will pay for the repair or replacement of your car if it is damaged or rendered a total loss through a range of causes other than collision. For example, it provides coverage if your vehicle is stolen, or damaged by vandalism, fire, earthquake, animals, a falling object or adverse weather.
Collision and comprehensive coverages are optional, but if you finance or lease your vehicle your finance company will likely require both. Otherwise, depending on the value of your car and your finances, these coverages range from very important to not important at all. As a rule of thumb, if the actual cash value of your car is not greater than five times the combined annual premium cost of collision and comprehensive coverage, then you may be better off not having these coverages. In that instance you would meet any repair or replacement costs yourself, but wisely rely on the principles of risk management to reduce the likelihood of those arising at all. Get quotes for both collision and comprehensive coverage, and then compare the premium to your best estimate of your car’s actual cash value.