Collision and Comprehensive (also sometimes referred to as OTC for Other than Collision) coverages are optional coverages under the portion of a car insurance policy that helps to cover your own vehicle and thus are referred to as Physical Damage Coverages.
States typically require Liability coverages of Property Damage Liability and Bodily Injury Liability these cover those that you may harm in an accident while Collision and Comprehensive however cover your vehicle for accidents and other perils. Mandatory state auto insurance laws do not require you to carry Collision and Comprehensive coverages but if you have a loan on your car or is a leased vehicle then your lien holder or leasing company will normally require these physical damage coverages be part of your car insurance policy.
Coverages of Comprehensive and Collision are definitely needed when you have a lien holder so that you fulfill the requirements of your financing documents and have the protection on the vehicle, the asset of the lien holder, so that if something happens to it you are likely covered by your automobile insurance company for it to be fixed. If you do not have these coverages and you damage the vehicle the repairs will be coming out of your own pocket or if it is totaled you will be personally responsible for the vehicle being paid off to your financing company. Without car insurance to cover your vehicle, and pay the lien holder the value of the car in a total loss situation, it can be a big financial burden on you.
Collision covers damage to your car when your car hits, or is hit by, another vehicle, or other object. This type of coverages pays to fix your vehicle less the deductible you choose. This optional coverage will pay for damage to your auto regardless of who causes the accident. Collision Coverage applies if another vehicle hits your auto or if your auto hits other objects that cause damage to your vehicle.
Comprehensive is also sometimes referred to as "other than collision" since it pays for damages to your vehicle caused by perils other than a collision. For example, Comprehensive insurance covers damage to your car if it is stolen; or damaged by flood, fire, or animals. It also pays to fix your vehicle less the deductible you choose.
So while Collision insurance pays for damages your car sustained due to a collision with another object, Comprehensive covers damage to your automobile from such things as vandalism, flood waters, hitting a deer, theft, or glass breakage.
Comprehensive and Collision coverages are normally most needed when your vehicle has a high value. Whether you have a lien holder or not, if your vehicle is newer or even older but has a high actual cash value then physical damage coverages help protect your vehicle which in turn helps protect you.
Unless you have plenty of money to make costly repairs or buy a new car if yours is totaled out then Collision and Comprehensive coverages will be important to you while your car is worth more than the coverage costs. Even if you are a safe driver accidents occur and can take away your car if you are in a total loss situation. If you cannot afford to buy a replacement vehicle and the cost of these coverages are not more than the worth of your vehicle then it can be wise to carry physical damage coverages.
The times you likely will feel best about making the choice to have Collision and Comprehensive is when you need to make a claim under these coverages. You will be glad to have Collision coverage if you are at fault in an accident and need your car repaired or paid out if totaled out. Even if you are not at fault in an accident it can be important to have Collision coverage since there are many uninsured drivers out there that could hit your vehicle or you could be a victim of a hit and run and thus have to use your own insurance coverages for damage to your vehicle.
Comprehensive is what you will want and be happy to have if your vehicle is hit by a wild animal like a deer, or a storm crashes a tree down on your car or someone vandalizes it or your windshield is hit by a rock and shattered. These types of events are covered by Comprehensive coverage and without it you would be paying out of your own pocket for repairs.
Collision and Comprehensive coverages your car insurance company will pay you your vehicle's actual cash value (ACV) if it is totaled due to a covered loss. A total loss of a vehicle usually means that the car is damaged beyond repair (or too costly to repair) or stolen. If you want your car fully protected you typically will want to continue to carry these coverages until it stops making economic sense to carry it. In other words, you should stop carrying this coverage when your deductible and this coverage's premium starts to equal your vehicle's ACV.
Each person is different, but if you have a $500 deductible and the car's value is $4000 then the most you can recover in a total loss is $3500. You would then need to decide if it is worth it to you to pay the physical damage premium portion of your auto insurance in return with the option of re-couping that money in the event of an accident. If the premium amount still makes economic sense to pay then you should keep Collision and Comprehensive coverage on your vehicle(s).
If you are trying to decide what car insurance coverages are right for you, try our car insurance coverage calculator. Once you determine what coverages are right for you get an instant car insurance quote from an auto insurance specialist at CarInsurance.com.