Comprehensive vs. Collision Coverage

Comprehensive insurance is worth it if the premium is a small percentage of the car's value. Comprehensive insurance might also be worth it if the policyholder cannot afford to replace the vehicle without comprehensive coverage, or if the car is driven or parked in a particularly risky area.

Although comprehensive insurance is not mandatory in any state, dealerships and lenders frequently require comprehensive insurance, along with collision coverage, on leased or financed cars. In that case, comprehensive insurance is definitely worth it, because failing to meet the lender's or lessor's requirements could result in expensive force-placed insurance or even repossession.

Factors to Consider When Deciding If Comprehensive Insurance Is Worth It

• Your car's age, mileage, and value.
• The cost of comprehensive insurance premiums.
• The risk of theft, vandalism, and natural disasters in your area.
• Your ability to pay for repairs or a replacement vehicle out of pocket.

An old rule of thumb recommended dropping comprehensive coverage when a car was five to six years old or had 100,000 miles. But this rule is now outdated, since newer cars have increased longevity alongside higher repair costs. Now, the standard rule is that comprehensive and collision coverage are both worth buying if the combined premium is less than 10% of the car's value, minus the deductible.

Cost is only one factor, however, so you should also consider how likely you are to file a claim, as well as what would happen to you financially if your car was stolen or destroyed by something other than an accident and you didn't have coverage. For instance, if theft, animal collisions, or natural disasters are particularly common in your area, you are especially likely to need comprehensive insurance. Similarly, even if your comprehensive premium is 15% of your car's value, for example, comprehensive insurance might still be worth it if you rely on the car and can't afford to replace it yourself.

The difference between comprehensive and full coverage is that comprehensive insurance is just the part of full coverage that covers damage to a car from things other than accidents, like theft or fire. Full coverage usually means a car insurance policy with comprehensive, collision, and the state's minimum requirements.

Comprehensive insurance mostly covers events outside of a driver's control, or incidents that happen when a car is parked. For instance, comprehensive covers vehicle damage or replacement due to natural disasters, extreme weather events, and vandalism. When combined with collision insurance, these two types of insurance cover most incidents that could damage your car, hence the designation “full coverage.” Comprehensive and collision coverage are not mandatory in any state, but some lenders and lessors will require them on a leased or financed car.

Since every state has different car insurance requirements, full coverage can also include several other types of coverage. For example, personal injury protection (PIP) and MedPay are required in certain states, and would therefore be included in full coverage in these locations.  

Finally, remember that even a supposedly full coverage policy will not cover everything. Things like rental car reimbursement while your own car is being repaired or replaced are available separately and aren't usually included in the term full coverage.

When shopping for insurance, it's best to look past labels like full coverage and instead consider your state's laws and your own financial situation. And if an insurance agent or broker offers to sell you full coverage, be sure to clarify exactly what's included.

Yes, you have to have comprehensive and collision coverage on a financed car. Most reputable lenders require comprehensive and collision insurance on financed cars to protect their investment if the car is damaged, stolen or totaled.

Comprehensive insurance pays for repairs or replacement if a car is damaged due to something besides a crash, such as theft, vandalism, or natural disasters. Collision coverage, on the other hand, pays to repair or replace a car that is harmed in an accident. Unlike liability insurance, comprehensive and collision are not required by any state laws.

When purchased in addition to the state minimum coverage, comprehensive and collision are usually referred to as full coverage. Full coverage insurance is generally more expensive than just purchasing the state minimum coverage, but you can save by shopping around for quotes and checking out WalletHub's guides to cheap car insurance and car insurance discounts.

Comprehensive insurance costs an average of $162 per year. The cost of comprehensive coverage varies based a few factors including the amount of the policy's deductible, the actual cash value (ACV) of the car, and the driver's location.

Since comprehensive insurance pays to repair or replace your car if it's damaged by something other than an accident, more valuable vehicles cost more to insure. Likewise, if your policy has a low deductible, your premium will be higher compared to a policy with a larger deductible.

In addition to the deductible and ACV, the cost of comprehensive coverage can vary based on the driver's profile, such as age, profession and location. For example, if you live in an area that is prone to certain natural disasters, comprehensive insurance may cost more because you are statistically more likely to file a claim.

Finally, the cost of comprehensive coverage varies by insurance company, too, so you should always get quotes from multiple insurers in order to find the best price.

You should drop comprehensive insurance when you can afford to repair or replace your car out of pocket in a worst-case scenario. You should not drop comprehensive insurance if the car is valuable, since the coverage is inexpensive and will usually pay up to the car's actual cash value, minus a deductible. Additionally, you definitely should not drop comprehensive coverage if it's required by your lender or lessor. Doing so can result in serious consequences like force-placed insurance and even repossession.

Comprehensive insurance is sometimes considered “bad luck” insurance, since it covers things that are mostly out of your control as a driver, like vandalism, theft, natural disasters or hitting a deer. A standard rule of thumb is to drop collision and comprehensive insurance when the combined premiums are more than 10% of your car's value, minus your deductible.

However, you should only consider this guideline within the context of your personal circumstances. It's also worth noting that many experts consider comprehensive insurance to be a better investment than collision coverage, since it is not affected by your driving habits and is generally cheaper.

In addition to your car's value and your own finances, how likely you are to file a claim should factor into whether or not you drop comprehensive car insurance coverage. For example, even if you could comfortably replace your car, it probably isn't smart to drop comprehensive insurance if you live in an area with frequent hurricanes.

The difference between full coverage and the combination of comprehensive and collision insurance is the addition of state-mandated liability insurance and, in some cases, coverage for a driver's medical care. Full coverage is generally defined as comprehensive and collision insurance plus a state's minimum car insurance coverage.

While comprehensive and collision coverage are not required by state laws, they are usually required on a leased or financed vehicle. Collision coverage pays for damage to the policyholder's vehicle from an accident, regardless of fault. Comprehensive insurance, which is sometimes considered “bad luck” insurance, covers events outside of a driver's control, like natural disasters and damage from animals. Because “full coverage” implies that everything is protected, comprehensive and collision are usually considered part of it.

The last component of full coverage insurance is a state's minimum required insurance coverage. Almost every state requires liability insurance, which pays for damage the policyholder causes to other people and their property. In addition, some states require coverage that pays for the policyholder's injuries in the event of a crash.

The average cost of collision insurance is $382 per year. The cost of collision insurance varies widely, however, based on vehicle value, deductible, driving history and ZIP code, among other factors.

Collision insurance, which is optional in every state, protects your car in the event of a collision with an object or another vehicle. Adding collision insurance will make your policy cost more than if you only had your state's required liability coverage. But collision insurance is still a good investment for many drivers.

Collision coverage is often bundled with comprehensive insurance, which covers expenses that are not from a collision, like theft or fire damage. Together, these two kinds of coverage are often called full coverage, although this term is not strictly defined.

It's important to note that the maximum amount you'll receive from your insurer for a collision claim is the value of your car when you crash it, not when you bought it. As a result, considering your car's value and your financial resources will help you decide when to drop collision insurance.

To see how much collision insurance costs for your specific circumstances, check out WalletHub's car insurance comparison tool. And be sure to always compare rates from multiple companies to get the best coverage for the lowest price.

You should drop your collision insurance when your annual premium equals 10% of your car's value. If your collision insurance costs $100 total per year, for example, drop the coverage when your car is worth $1,000. At that point, your insurance payments are too close to your car's value to be worthwhile. Drivers can easily find a car's value with the online vehicle appraisal calculators from Edmunds or Kelly Blue Book.

The 10% rule for dropping collision insurance is not set in stone. But it's a good milestone to keep in mind because as the value of a vehicle falls over time, the value of its insurance coverage does too. And when you start paying a significant portion of your car's value in premiums each year, you're simply overpaying to offset the actual level of risk that remains – at least as far as collision damage to your own vehicle is concerned.

Collision insurance repairs or replaces your insured car if it's damaged, whether by another vehicle or an object like a tree or mailbox. This insurance covers up to the cash value of your car - which is where the 10% rule comes in. This rule most frequently applies to older cars or vehicles with a lot of mileage, as they are worth relatively low amounts. There are a few other situations where it might be a smart move to drop collision insurance, too.

When to drop collision insurance

When you rarely use your car

The more you drive, the higher your risk of being in an accident – so if you don't drive often, your risk is lower than average. That means you could be paying for collision insurance that you're unlikely to need.

When repairing a car would not have a big impact on your finances

Maybe you have an emergency fund that you could use to fix your vehicle. If you're willing to spend your savings on car repairs, then it's safe to drop collision insurance. However, people often prefer their emergency fund to be a safety net for when they leave their job, face health issues, or need home repairs. It all depends on what you're comfortable with personally and how much you have saved.

When you're paying 10% of your car's value in premiums annually

The cost of repairs goes down as your car gets older, so you don't want to overpay as your car loses value.

When NOT to drop collision insurance

Every state requires car insurance except for New Hampshire and Virginia. However, the law doesn't mandate collision insurance. The only legally-mandated car insurance is liability coverage, for damages to someone or something that you accidentally hit with your car. Although collision insurance is optional, it's well worth purchasing for many people.

If you're financing your car, collision insurance is usually required. Otherwise, you might be stuck with a repair bill equivalent to the value of your new vehicle! If you're leasing your car, the same logic applies – most lessors require drivers to carry collision insurance, too.

In summary, it's a smart money move to drop collision insurance when your car is old or has high mileage, but you should definitely think twice about doing so.