Collision, Liability, and Comprehensive Insurance: What’s Best for Your Financial Bottom Line?

When it comes to calculating the family budget, buying auto insurance is a constant balancing act because if you buy too much you will end up struggling to make costly monthly or bi-monthly payments, but if you do not buy enough, you might find yourself paying more out of pocket to get your car fixed if you are involved in an accident. If you are about to switch insurance companies or setting up auto insurance for a new driver in the family, taking the time to learn about liability, collision, and comprehensive plans may help you make the best decision for the health of your household budget.

Liability Insurance

Liability auto insurance is the minimum insurance coverage required by law in most states. While specific laws regarding liability may vary where you live, such as whether the car or the individual driver is the one insured, this type of insurance covers damages to the other driver and his or her car when you are involved in an accident. For example, if you rear end someone because you were distracted and failed to notice traffic stopped ahead of you, liability would cover damages to the other driver’s car and any injuries he or she might have suffered.

However, if you or your car sustained damage or bodily injury, liability would not cover them. Most liability policies cap what they will pay out per person or per incident. While carrying liability only on your vehicles may help lower your monthly payments, these savings may be negated if your car is damaged in an accident and you are found to be at fault.


Collision is optional, additional coverage that covers damage to your vehicle in case of an accident. When you purchase this type of coverage, your insurance company will set a deductible that you will have to pay out of pocket before your coverage kicks in. For example, if your car suffers $2,000 in damages in an accident and your deductible is $500, you will have to pay that amount in repairs before the other $1,500 is covered by your insurance. Your deductible is typically set by the coverage package you choose. While collision is not mandatory insurance, many banks require you to carry it if you are leasing or financing a car until it is paid off.


Comprehensive car insurance covers damages that stem from incidents other than a car wreck. Storm or hail damage, damage that occurs from hitting an animal, or theft of your car’s stereo would all be covered under comprehensive insurance. Many companies package comprehensive and collision together in a bundle to help their customers save money on their monthly payments. You may want to consider buying comprehensive insurance if you live an area where inclement weather is common and you do not own a home with a garage.

The Bottom Line

While your family’s budget and income will most likely be the deciding factor when it comes to buying auto insurance, it might help you to make a list of what you want out of coverage and what you are most concerned about as a vehicle owner. Discuss these concerns with your insurance representative, who should be able to offer you one or more coverage options to suit your budget.




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When I'm not volunteering my time at a local nonprofit, I write about family. Running a household isn't easy, but I'll do my best to share my insights!

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