There are two types of auto insurance that are often confused for each other and mistaken for one another. Collision and comprehensive insurance are both coverage for your vehicle, but they act very differently from one another. Collision insurance insures your vehicle when you are in a collision or accident. Comprehensive insurance covers you for other things and is also known as ‘other than collision insurance’, such as vandalism, disasters, acts of God, theft, fire and impacts with an animal.

Comprehensive auto insurance doesn’t cover any damage that you receive in a collision and in order to have the best protection for your vehicle, you should have both collision and comprehensive insurance on your auto insurance policy. Both comprehensive and collision insurance have a deductible amount that you will pay (will be deducted from the overall payout for fixing or replacing your vehicle) when you file a claim on your insurance. You can save money on both comprehensive and collision insurance premiums by raising the deducible. However if you do have a claim, it will mean more out of pocket expense for you. You should ensure that the deductible amount is affordable for you at any time.

There’s another type of insurance that you may want to look into, especially if your vehicle is new. Quite often, when you file a claim on your comprehensive insurance for a total loss (you destroyed your vehicle and it needs to be replaced) you will be reimbursed for the fair market value of your vehicle, which could be less than the cost of your vehicle, especially if you are still making payments on it. If you’ve leased or financed your vehicle, however, your leasing agent or lender may require you to have GAP insurance, which pays the difference between the claim amount and the actual replacement value (amount owing) on your vehicle.

Your collision insurance pays for motor vehicle accidents or if you hit a building or light standard. Most people buy their cars on credit, borrowing money from the bank. Most lenders and lease companies will require you to have collision insurance on your newer vehicle in case you are in a motor vehicle collision. If you don’t have collision insurance and you were in a total loss accident, you could be facing a serious debt that you will still owe even though your car is ruined. Your collision insurance will pay to repair your vehicle if you are at fault in a collision and will pay to replace your vehicle at cash value. If you are not at fault in a collision, the other party’s insurance will pay to fix or replace your vehicle. It is their liability insurance that will cover the damages to you and your property – not your insurance. Thusly if you are not at fault in the collision, it should have no impact on your premiums and rates. If you are at fault in a collision, you can expect your rates to rise. Similarly, if you claim on your comprehensive insurance you will be facing higher rates.