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What Are Collision and Comprehensive Insurance?

Collision coverage pays for damage to your own auto that results from colliding with another vehicle or object, or from a vehicle rollover. Your car is covered no matter who caused the accident.

Comprehensive coverage pays for damage to your auto caused by something other than a collision. This includes theft and vandalism, and disasters such as fire, flood and hail.

Collision and comprehensive coverage's usually do not pay for the total loss.

You generally have a deductible, an amount you must pay out of your own pocket before your auto insurance payment takes effect. Suppose, for example, that you have a $250 deductible. On a loss of $1,000, you would pay the first $250 and your insurance company would pay the remaining $750.

Depreciation will also affect the amount you recover for the damages done to your car. As your car ages and its value declines, the amount you would collect for a total loss declines as well. Your insurance company reimburses you for the actual cash value of your car or its parts, at the time of the loss. For example, if your car was purchased for $20,000, you will get less than your original purchase price to replace it due to the car's "natural" depreciation in value. You can find out the current value of your car by consulting the N.A.D.A. Official Used Car Guide, which is in most public libraries and banks.

Sometimes it may not make financial sense to buy collision and comprehensive insurance on an older car. Why? Generally, speaking, cars depreciate as they age. The maximum amount that will be paid under Collision coverage is the actual cash value of your car minus the deductible. When making this decision, you need to know, the "book" value of your car, your deductible for each loss, the cost of coverage, and the amount you would receive if your car was "totaled" (after subtracting your deductible from the book value). Only you can decide after considering everything whether the cost of insurance is more economical than the cost of repairing or replacing the car at your own expense.