Are you in the process of signing up for auto insurance but don't totally understand the difference between collision and comprehensive coverage? Here is what you need to know about the differences between these two types of auto insurance coverage.
Understand What Your Actual Cash Value Is
The first thing that you need to know about your auto insurance policy is what the actual cash value means when it comes to your automobile coverage. That is because collision and comprehensive insurance often have limits that are not up to a dollar value but are up to what is referred to as the actual cash value of your vehicle. When the time comes to use your coverage, your car's value will be estimated as to what it was right before the incident. The actual cash value is not what it is to buy a similar model to what your car would be to buy a new car today or what you paid for it. This means that your policy limits are much lower on an older car than they would be on a brand-new car.
Understand What Comprehensive Coverage Is
Comprehensive coverage is used when your vehicle becomes damaged by things that are not other drivers on the road and are not stationary. This could include an act of nature, such as a hailstorm or hurricane that causes damage to your vehicle that was in the path of the weather event. It could also mean an animal that you run into while driving, or your car being damaged by a house fire while your car is parked in an attached garage.
Understand What Collision Coverage Is
Collision coverage is designed to protect you if you are at fault for causing an accident with another driver on the road or if you were to hit an object that is stationary. A good example of this is if you were to hit a parked car on the side of the road or backed your car up into a light post and damaged your car. However, other items are covered that are considered stationary as well. If you were to drive your car off the road and go into a ditch, this would be considered an accident covered by your collision coverage.
If you are not sure if you need this type of coverage for your vehicle, ask your auto insurance agent for more information about how it would apply to your specific policy.