If you have a vehicle with some value left in it yet and want to insure it properly you need to have at least these two optional components of a full policy. Every extra costs money and therefore owners are expected to make choices. This post will define them, explain their use and discuss the circumstances that may justify not having or dropping them.
Liability automobile insurance covers any harm you may cause to third parties. Every state in the US requires at least a basic form of it before a vehicle can be driven on the streets. If you want to include the damages to own automobile regardless of who is at fault you would need to consider the following two common provisions.
Collision Coverage; pays for accident repairs or open market value of a totaled car following a crash with other vehicles, stationary objects and properties. As the name suggests, it refers to losses due to a crash or hit.
Comprehensive Coverage; pays for damages due to most other unforeseen incidents like flood, storm, hail, fire, vandalism, auto theft and things like being hit by a falling brick or hitting an animal. Typically it includes most things that can happen to your automobile, except collision.
They are optional as it is own automobile and you are free to get it and make a claim in cases of the above situations. Otherwise, you would have to get it repaired out of pocket. Considering that cars are fetching a fair sum these days potential losses can be tens of thousands of dollars. Many people may find it hard to deal with such financial crises without any compensation.
When you buy full coverage vehicle insurance these two extras would be included. They are usually sold together in a bundle and have a deductible amount set for each of them. That means you would have to pay the deductibles first before you can ask the company to settle the rest of damages. That is why many motorists may choose to ignore small incidents and deal with them out of pocket. This would work out better in the long term since your auto insurance premium would have otherwise gone up.
As a general rule, people with older cars may choose not to have Collision and Comprehensive, as possible losses wouldn’t be big enough to worry them. Instead they may prefer starting to save for a new ride whenever it is needed. The commonly agreed threshold is about $4000. Considering deductibles and premium increases, anything below may not be worth bothering or it may be all right to drop if you already have them.
Of course, every person’s risk tolerance is different and usually personal circumstances play an important role in these decisions. However, you would be required to buy them if you have a loan on the automobile. Also, you would be wise to buy them if you have a half decent car. You made an investment when you bought it and Collision and Comprehensive car insurance is there to protect that investment.