Liability, Collision and Comprehensive are the three main types of auto insurance policies on the American market. Let us see what each of them stands for and what the differences are.
Liability insurance is the bare-bone auto coverage that protects other people and their properties if you cause an accident. It is mandatory in most states (only New Hampshire, California and Wisconsin allow resident motorists to drive without Liability insurance, but they ask for alternative proof of financial responsibility).
A Liability insurance policy is made of Bodily Injury Liability and Property Damage Liability, and each state has its own minimum thresholds which are referred to as an x/y/z triplet, where:
- X is the amount, in thousand dollars, that goes towards medical expenses per injured passenger, but not more than y for the whole accident,
- Z is the amount, in thousand dollars, that goes towards repairs on other peoples’ properties.
Minimum limits are usually in the range of 25/50/25, but there are states like Alaska or Maine with 50/100/25 and, on the lower end, we’ve got Ohio with 12.5/25/7.5.
Collision, as the name says, protects your car in case you hit other vehicles, people or non-moving objects like fences, poles or kiosks. It will cover you, regardless of who was at fault in an accident. As a side note, collision with animals isn’t covered by this type of insurance. If you live in a rural area where domestic animals are likely to be on the loose on public roads, you should consider getting a Comprehensive policy.
Should your car get severely damaged, a Collision policy should pay for the towing and storage and, of course, cover the costs of repair. One of the rare scenarios where your Collision claim might be denied is if the car broke down mechanically due to improper maintenance.
Comprehensive covers everything that Collision doesn’t and is often referred to as “other than Collision”. It protects you from theft, fire, vandalism and severe weather conditions. Some Comprehensive policies may cover your car from natural disasters as well. Most insurance companies won’t sell you a Comprehensive policy without a Collision one.
Even though Comprehensive isn’t mandatory in any state as of now, if you have a financed car then your lien holder will most likely ask you to purchase a Full insurance policy, meaning you have to buy both Collision and Comprehensive insurance, as well as the state-mandated Liability policy.
Both Comprehensive and Collision policies are subject to a deductible, i.e. an amount you have to pay out of your pocket when you file a claim, before the insurer provides the agreed difference. Typical deductibles are between $250 and $1,000, but you can opt for a much higher one. Minimum deductibles vary from one insurer to another and there are even companies who will sell you a Comprehensive or Collision policy with no deductible.