Comprehensive vs. collision car insurance: the differences and when you can cancel

When you complete quotes online, most insurance providers will “strongly recommend” or even default in some level of collision and comprehensive coverage. 

Statistically, most drivers just roll with it (pun intended). 74% and 78% of drivers are covered by collision and comprehensive coverage, respectively, costing them an extra $900 per year (according to Insurance.com). 

But what if I told you that despite their essential-sounding names, you may not even need collision or comprehensive coverage? And that canceling them, of course, could save you thousands over the next few years. 

Let’s investigate collision and comprehensive auto insurance coverage: what they cover, what they don’t, and when it’s safe to cancel. 

Comprehensive vs. collision insurance coverage 

What is comprehensive coverage?

I’m going to start by saying that comprehensive insurance is not comprehensive. 

If I’d worked at Travelers Insurance in 1898 when they were coming up with collision and comprehensive coverage, I’d have renamed them “accident” and “incident” insurance. At least those labels would be somewhat less confusing. 

So what is “comprehensive,” aka incident insurance?

Comprehensive insurance covers damage to your car that occurs outside the context of an accident, things like:

• Acts of nature – flood damage, hail damage, falling trees, lightning strikes, etc.
• Crime – theft, vandalism, getting keyed, etc.
• Miscellaneous damage – fire, explosions, getting hit by a deer, getting smashed during a riot, etc.

Here’s one way of putting it: if collision covers damage that you cause, comprehensive covers damage that you find. If your car sustained damage while it was stationary, and you weren’t hit by another driver, it’s probably covered by comprehensive insurance. 

My roommate Clark and I both filed comprehensive-related claims in college. In both cases, we walked up to our cars and muttered a string of four-letter words. 

In his case, someone from the dorm above had thrown a water balloon into the parking lot below. They must’ve assumed it would harmlessly splat on someone’s car – nope! It blasted right through Clark’s windshield and sent water cascading down his center console, frying his CPU and totaling the car. 

My story is much shorter; someone keyed my car in my dorm parking lot. To this day, I have zero suspects. I truly cannot name a single person I think would do such a heinous, lowlife act (still bitter). 

All this being said there are certain scenarios where you could be driving your car, sustain damage, and be covered by comprehensive, not collision insurance. If your car is damaged by nature or vandalized while you’re in motion, that’s covered by comprehensive since it technically wasn’t part of an auto accident. 

What is collision coverage?

Collision coverage helps cover the cost of repairs to your car after an auto accident. 

Collision fills an important gap left by property damage liability (PDL) coverage. 48 states require drivers to carry PDL so that at-fault drivers can afford to pay for the damage they cause. Without minimum insurance laws, the streets would be full of uninsured drivers, and the odds that you’d get hit by someone who could never pay you back would be too high. 

That’s why states require PDL, but they don’t require collision because:

1. It’s really expensive.
2. The government doesn’t really care about the damage you cause to your own car.

That being said, the line between where PDL ends and collision begins can be a bit confusing, so let’s look at a few examples:

Scenario 1: you hit another driver

• What property damage liability covers: damage to their car.
• What collision covers: damage to your car, and your premiums will likely increase.

Scenario 2: you’re hit by an uninsured motorist

• What property damage liability covers: nothing.
• What collision covers: damage to your car, and your premiums won’t increase.

Scenario 3: you’re hit by an insured motorist

• What property damage liability covers: nothing.
• What collision covers: nothing (the other driver’s property damage liability will pay you).

Scenario 4: you’re hit by an insured motorist, but their insurance won’t payout

• What property damage liability covers: nothing.
• What collision covers: (potentially) the difference between the payout and the actual cost of repairs.

Scenario 5: you hit a stationary object (parked car, fence, etc.) 

• What property damage liability covers: cost of replacing or repairing the other person’s property.
• What collision covers: damage to your car, and your premiums will likely increase.

My favorite example of a collision insurance claim is the one my buddy Jake filed for his Cadillac. He was cruising some fast, windy rural roads at night and suddenly struck a two-foot rock placed just outside the white line. He gathered a police report and filed a collision claim, and since the rock had bent his frame, his provider totaled the car. To his shock, he also received a citation for “destruction of church property.” He challenged it in court using photos of the accident, the church was ordered to remove the holy rock, and his provider didn’t raise his premiums. 

So that’s collision insurance. In short, it covers damage to your car after a collision, in cases where property damage liability won’t payout. In its most basic form, collision insurance essentially protects you from the damage you cause to your own car. 

Comprehensive vs. collision vs. property damage liability insurance

Collision, comprehensive, and PDL are the three most common (and expensive) types of auto insurance, and the line between them can often seem blurry. 

Here’s a generalized recap:

1. Collision covers damage to your car in the event of an accident.
2. Comprehensive covers damage to your car outside the context of an auto accident.
3. Property damage liability covers damage to other people’s cars and property.

To illustrate, here’s a table of some claim scenarios and what types of coverage apply:  

Hopefully that all clears up what collision and comprehensive insurance cover. Now, let’s talk about how much of each you really need. 

Statistically speaking, you’re probably already paying for collision and comprehensive coverage (three out of four drivers do). I know it’s tempting to drop them right now and save $900, but keeping them might make better financial sense for you. 

When does it make sense to keep comprehensive and collision coverage?

If your car is financed or leased, I’ll save you some reading: you probably can’t drop collision or comprehensive coverage. Most lenders require you to have it so that you can pay off your car in the event of an accident. 

If you own your car, here are a few reasons why you might want to keep collision and/or comprehensive coverage on your car. One of these reasons alone probably isn’t worth $900, but if you check multiple boxes you might want to keep them. 

Five reasons to consider keeping comprehensive coverage:

• You live in an area with inclement weather.
• You live in a rural area with a lot of animal-related auto accidents.
• You live in an area with lots of auto-related crime, like theft and vandalism.
• You park your car in an uncovered area with lots of trees.
• You cannot afford an emergency $1,500 repair to your car.

Five reasons to consider keeping collision coverage:

• You live in a state with the highest rates of uninsured drivers (FL, MS, NM, MI, TN, AL, WA, IN, AR, D.C.).
• You have a long, complicated route to work (and thus a higher probability to be in an accident).
• You’ve been in multiple at-fault accidents before.
• Your car is not a “beater” and you’d like to keep it in perfect condition.
• You cannot afford an emergency $1,500 repair to your car.

Why have car insurance without comprehensive and collision?

You might be reading this and thinking: isn’t that what car insurance is for? To replace my car if it’s totaled in an accident?

In part, yes. But many drivers have auto insurance policies that do not include comprehensive and collision coverage. The most essential forms of auto insurance pay for damage you cause to other cars and drivers. For example, if you cause a crash and hurt another driver, your car insurance will cover the driver’s medical bills. And even if you don’t have collision coverage for your own vehicle, your car insurance may cover the cost of repairing the other driver’s car.

These essential provisions in auto insurance policies are why most states require drivers to carry car insurance.

In addition, if you finance or lease your car, the bank usually requires that you carry collision and comprehensive insurance. Once your car is paid-in-full, however, the cost-benefit analysis of buying the additional insurance coverage is up to you.

There’s a lot of debate as to when it is possible to cancel your collision and comprehensive car insurance. This is an important question because the combination of the two has a major effect on the cost of your car insurance premiums. But that isn’t always the right thing to do.

When you can consider dropping comprehensive and collision coverage

As soon as you cancel your collision and comprehensive coverage, you’ll be completely on your own if you need to repair or replace your vehicle as a result of an accident or an incident. If you have the financial resources to cover the repair or replacement of your car based on its book value (which you can check online through Kelly Blue Book) then you will be able to drop the coverage without concern.

The 10% rule

As a rule of thumb, it’s thought that you should consider dropping collision and comprehensive when the cost of the additional premium exceeds 10% of the book value of the car.

Example: if the book value of your car is $2,000, 10% of this would be $200. If you pay $230 per year for collision and comprehensive, it might be time to consider dropping this coverage.

But if you do, you should seriously consider banking the savings as a reserve against future repairs or eventual replacement.

Where to get your insurance

Liberty Mutual, I’ve found, also makes it easier to fully cover your vehicle without spending extra money. Your policy is customized to include only the coverage you need.

If you want accident forgiveness, for instance, that’s an add-on, as is basic comprehensive features like damage from a collision, the well-being of yourself and passengers after an accident, and a collision while you’re driving a leased vehicle. By customizing your policy, you can combine collision and comprehensive coverage in a way that makes sense for your lifestyle and budget.

Summary

Collision coverage pays for vehicle damage caused by crashes, while comprehensive coverage pays for any other vehicle damage, such as theft or flood damage.

You must carry collision and comprehensive car insurance if you have an outstanding auto loan or leased the car. (If you own your car outright, you can decide if you need to pay for comprehensive and collision coverage.)

It makes sense to cancel comprehensive and collision insurance if:

• The annual premiums for comprehensive and collision insurance exceed 10% of your car’s book value and
• You have the cash available to repair or replace the car in the event of a loss.

Carefully evaluate the risks and benefits of canceling your collision and comprehensive coverage before taking the plunge.

Read more:

• Car Insurance Definitions: What Every Driver Needs To Know
• Why Is Your Car Insurance So High? (And How Can You Lower Your Rates?)