A Texas Accident Victim's Guide To Comprehensive and Collision Insurance
When I ask my clients who have been injured in an automobile accident what kind of insurance coverages they have, I am always amazed at how many say they have "full coverage" when they only have the minimum liability limits. There is lots of confusion between what the law requires and what you need. Previous articles have discussed uninsured and underinsured motorists insurance, and personal injury protection and medical payments insurance. These extra coverages which are not required by law serve mainly to compensate you for your injuries and property damages caused by another party.
But how do you protect yourself for damages that you or someone else driving your car may be responsible for causing? We all try to be careful out there, but accidents do happen, and sometimes its our own fault. Liability insurance basically pays for the other guy's damages (see my earlier article on liability insurance), but doesn't cover any of your own damages. Personal injury protection and medical payments coverages will pay your reasonable and necessary medical bills, but offer nothing to pay for the damages to your vehicle. For these damages, you need comprehensive and collision insurance.
These coverages are usually bunched together under one premium, and are designed specifically to protect your vehicle. Comprehensive coverage is for damage to your vehicle not caused by a collision, such as break-ins, hail damage, etc. Collision coverage is for damages to your vehicle when it has been in a collision with another vehicle, telephone pole, tree, etc. So if you are the one who accidentally rear-ended the guy in front of you, collision coverage will pay to either repair your vehicle, or pay you its fair market value if the vehicle is totaled.
Most lenders require these coverages as protection for their collateral, your vehicle. Once the loan has been paid off, many people drop these coverages. I have heard several rules of thumb about when to stop carrying these coverages, including when your car is 5 or 7 years old. I've always felt you should carry these coverages until your car, either by its age or condition, just isn't worth much in the way of fair market value. It certainly has value to you because it runs and gets you to and fro, but if the car dealer only offers you $500 on a trade-in, you can probably save some money and cancel these coverages.