Comprehensive and Collision Coverage: Know What You Need
There are two types of car insurance coverages that a person can choose from that help them avoid any mishap related to payment after a car has been in a situation. These two types of optional coverages are:
- Collision Coverage
- Comprehensive Insurance
Many times, people have an inherent confusion about the difference between collision and comprehensive coverages and for that reason, we are talking about the difference and benefits of each because when you know, the choice is easier to make!
In a typical case, this is what is paid for in the types:
Collision Coverage helps pay for
- Damage to the car when it is hit by some other vehicle
- Damage to the vehicle when the person hits an object, for example, fence or pole.
On the other hand, comprehensive insurance helps pay for
- Damage to the car from hail, vandalism, fire, flooding, falling objects, and windshields being cracked by rocks
- Damage to the car from when a car hits an animal, such as a Deer
- The value of the car if it is stolen and not found
On a typical note, both the collision coverage as well as the comprehensive insurance are provided at a cost that an average person will be able to take any of these, keeping both the options relatively affordable.
The best reasons to buy collision and comprehensive coverage are among the following circumstances:
- If the car is less than the age of 10 years.
- Whether the vehicle is more than a decade old, and yet is worth equal to or more than 3,000 USD.
- If it’s not affordable for the person to repair or replace the car in the case of it being severely damaged.
When to drop collision and comprehensive coverage?
When a claim is filed for the comprehensive or collision type, the insurer will only be paying a fair market value of the car, minus the deductible. This inherently means that smart car insurance buyers should be able to assess the financial condition, car condition, age as well as the value before further deciding if it is necessary to opt for collision and comprehensive coverage.
In the case a person knows that insurance won’t pay for any major mechanical issue, it might not be useful to opt for collision and comprehensive coverage.
To help get a basic idea about when to ponder upon dropping comprehensive and collision, these circumstances can be taken into consideration:
- When the premiums for these two types of coverages reaches a value of 10 percent or more of any potential payoff, in the likely case a person files a claim. Any normal potential payoff is car’s actual cash value at the point minus the deductible. For example, if a car is worth AED 20,000, and the deductible is AED 2,500, then the potential is AED 17,500. If the annual comprehensive, as well as collision premiums, surpass AED 1,750, then it is better to drop them.
- If the yearly comprehensive, as well as collision premiums plus all the deductibles, add up to a figure of being more than the value of the car. There are online tools that can help understand when that limit is reached.
- You won’t pay for the car to be fixed if it ended up with mechanical issues.
Some general guidelines on how to handle the cars as they grow older:
- Maintaining full coverage with all the manageable deductibles till the time the car has been paid off.
- Building the emergency savings apart from raising the car’s insurance deductibles for lowering the rates.
- Drop comprehensive and collision coverage, when it is clear that a person will buy a new car rather than get the current one fixed.
A good barometer can be taken in the form of a car repair, which costs just as much as the premiums and the deductibles. If a person is sure to buy a newer car, then it is better not to insure the old car model for collision and comprehensive coverage.
Can only collision be dropped?
Since comprehensive coverage is a significantly smaller percentage of the total premium tab, and it covers a lot of events, it is worth keeping.
All insurance companies prefer that comprehensive and collision coverage are purchased together, with only a few allowing the customers to buy one of the two. It is usually difficult to obtain comprehensive without collision coverage rather than just obtaining collision coverage on its own.
To know about comprehensive insurance providers in UAE, just click here!