Collision and Comprehensive Coverage
No state in the union requires drivers to carry either collision or comprehensive coverage in their auto insurance policies. This requirement generally comes from a lender when a auto is financed.
Collision coverage pays to repair your vehicle in the wake of an accident. Collision coverage kicks in regardless of whether the insured is at fault or not. In addition, many carriers will reimburse the insured for their deductible if the other party is found to be at fault. Comprehensive covers other vehicular incidents, including fire, vandalism, natural disasters, damages from theft or as a result of hitting a deer.
This collision/comprehensive portion of your policy is generally the most expensive, and if you’re looking to lower your insurance costs, this is the place to turn. Choosing a higher deductible can make a substantial difference in your premiums, and it’s a sensible choice for the majority of drivers because it still allows you to carry collision/comprehensive coverage. But before getting carried away, keep in mind the trade-off you’re making: After every mishap, however large or small, you’ll be responsible for up to the dollar amount of that deductible before the insurance company kicks in a cent.
Should repairs to your car get too pricey, the insurance company has the option to consider it “totaled.” Often they will total your auto if the repair costs exceed a certain percentage of the vehicle’s worth—and that percentage can be as low as 55%. If they do total the vehicle, the insurance companies generally will not pay you more than your auto’s book value (even if you owe more on your vehicle than the vehicle is worth). Therefore, before buying your policy, it’s a good idea to check Kelley Blue Book to see what your vehicle is worth.
To save money on your auto insurance, avoid buying coverage that exceeds the amount the insurance company would be willing to pay you should your vehicle be stolen or totaled. Gap insurance is a coverage that will cover a shortfall between the vehicles value and a payoff. There are still certain parameters, but in general the Gap coverage will cover the difference.