When you are shopping for auto insurance in the United States, you will inevitably be asked if you want "full coverage." While "full coverage" isn't a legal term, in the insurance industry, it almost always refers to a policy that includes state-mandated Liability insurance paired with Comprehensive and Collision insurance.
While liability insurance pays for the damage you cause to other people's property and medical bills, comprehensive and collision coverages exist specifically to pay for repairs to your vehicle. But what is the difference between the two? Do you really need both? In this 1,000-word guide, we break down exactly what these coverages protect, how deductibles work, and when it makes financial sense to drop them entirely.
Collision Insurance: Protection Against Crashes
Just as the name implies, Collision insurance covers the cost to repair or replace your vehicle if it is involved in a collision with another vehicle or a stationary object, regardless of who is at fault.
What Collision Covers:
- You rear-end another vehicle at a stoplight.
- You lose control on an icy road and hit a telephone pole, guardrail, or tree.
- Your car suffers a single-vehicle rollover.
- Your parked car is hit by another vehicle (a hit-and-run scenario).
- You accidentally back into a neighbor's fence or mailbox.
Comprehensive Insurance: Protection Against the Unpredictable
Comprehensive insurance covers damage to your vehicle that is caused by events outside of your control—essentially, anything that is not a collision. Because of this, it is sometimes referred to as "Other Than Collision" (OTC) coverage.
What Comprehensive Covers:
- Weather and Natural Disasters: Hail damage, floods, hurricanes, tornadoes, and lightning strikes.
- Theft and Vandalism: If your car is stolen, broken into, or keyed.
- Fire: Engine fires or surrounding wildfires.
- Falling Objects: A tree branch falls on your roof during a storm, or debris kicks up from a truck on the highway and shatters your windshield.
- Animal Strikes: Hitting a deer, moose, or other animal on the road is uniquely classified as a comprehensive claim, not a collision claim.
Key Differences at a Glance
| Scenario | Collision Pays | Comprehensive Pays |
|---|---|---|
| Hitting another car | Yes | No |
| Hitting a deer | No | Yes |
| Tree falls on parked car | No | Yes |
| Car is stolen | No | Yes |
| Hitting a pothole causing damage | Yes | No |
How Deductibles and Payout Limits Work
Both Comprehensive and Collision coverages require you to select a deductible. A deductible is the amount of money you agree to pay out of pocket before your insurance company steps in to cover the rest of the repair bill. Common deductible amounts in the US are $500, $1,000, and $1,500.
For example, if a severe hailstorm causes $3,000 in damage to your car's roof and hood, and you have a $500 comprehensive deductible, you will pay the auto body shop $500, and your insurance carrier will issue a check for the remaining $2,500.
The Actual Cash Value (ACV) Limit
It is vital to understand that Comprehensive and Collision will never pay out more than the Actual Cash Value (ACV) of your vehicle at the time of the loss, minus your deductible. ACV accounts for depreciation. If you total a car you bought 5 years ago for $25,000, the insurance company will only pay out what the car is worth today (perhaps $12,000), not what you originally paid for it.
What About Glass Coverage?
In some US states, insurers offer "Full Glass Coverage" without a deductible as a rider to your comprehensive policy. If a rock cracks your windshield, the insurance company replaces it entirely for free. Depending on where you live, this add-on can save you hundreds of dollars.
Do You Actually Need Both Coverages?
Neither comprehensive nor collision insurance is legally required by any state. However, they may be required by your lender.
- If you finance or lease your car: Your bank or leasing company will mandate that you carry both comprehensive and collision coverages until the vehicle is completely paid off. This protects their financial investment in the asset.
- If you own your car outright: The choice is entirely up to you. You can carry one, both, or neither. (Many people choose to keep comprehensive because it is generally much cheaper than collision and protects against total loss scenarios like theft or fire).
The "10 Percent Rule" for Dropping Coverage
When does it make financial sense to drop these coverages? A common rule of thumb recommended by financial advisors is to drop comprehensive and collision when the annual cost of the premiums exceeds 10% of the car's current Actual Cash Value.
For instance, if your older vehicle is only worth $3,000, and your comprehensive and collision coverages cost $400 a year with a $1,000 deductible, your maximum possible payout in a total loss scenario is only $2,000 ($3k value minus $1k deductible). In this scenario, paying $400 a year is mathematically inefficient; you are better off dropping the coverage and putting that $400 into a savings account for repairs.
Final Thoughts
Choosing between comprehensive and collision coverage—or deciding on the right deductibles—comes down to the value of your vehicle and your personal risk tolerance. Always compare rates before renewing to ensure you are getting the best value for your physical damage protection.
If you're unsure if you are paying too much for "full coverage," compare quotes today with Motorence to see how much you could save.