When collision insurance isn't enough

An unfortunately large segment of America's deer population still tries to scamper across busy American roads – just ask any of the 500,000 motorists that Car & Driver magazine estimates run into a deer every year.

And perhaps 25 percent of such run-ins leave the driver holding the money bag. As it turns out, deer strikes aren't a collision as far as auto insurers are concerned.

Deer fall under the comprehensive portion of an auto policy, and about 25 percent of drivers lack such coverage, estimates the Insurance Information Institute (III). That leaves motorists vulnerable to repair costs not only for deer strikes – $2,000 each, on average – but damage from hail, flood waters, falling tree limbs, theft, or vandalism.

These are all examples of insurance that's needed, but sometimes overlooked. Motorists sometimes think that when it comes to insurance, a policy is a policy is a policy, but there are many variations on this theme and the cheapest coverage is not necessarily adequate coverage.

"The lowest premium isn't always the best deal," says Kirk Hansen, claims director for the Alliance of American Insurers, a trade group for property and casualty insurers.

Barry Raynor was glad he had comprehensive insurance a few years ago when his car struck a deer along the Pennsylvania Turnpike. Mr. Raynor, a retiree from Hartsville, Pa., escaped injury but his 1996 Pontiac was in sorry shape. It needed $10,000 worth of repairs, all of which the insurance company agreed to pay.

"Collision insurance involves a collision with another car, but not with an object," explains the III's P.J. Crowley.

Motorists often drop "comp," as it sometimes is called, along with collision coverage when their cars age and they become worth less money. They figure the annual premium they pay for this insurance isn't worth the benefit they'd derive if their old car gets into a smash-up.

The simultaneous cancellation of comprehensive coverage may not be necessary, says Larry Wentz, of the Kindt, Kaye & Wentz insurance agency in Horsham, Pa.

"Most insurance companies will let you keep comp after you drop collision," says Mr.Wentz, who is Raynor's agent. Wentz points out that comprehensive coverage costs maybe one-quarter or one-fifth of what collision coverage costs, so the annual savings is tiny in comparison. (Wentz notes that comprehensive rates drop even lower for auto owners who live farther away from big cities.)

Coverage limits vary from insurer to insurer. Because of that, Mr. Hansen suggests that policyholders check with their agents when they want to change the terms of their auto insurance.

Motorists with loans on their cars also should check with their agents to make sure they have enough coverage to repay the lender. This insurance, called "gap" coverage, is especially important to new car owners.

We've all heard tales of watching $5,000 evaporate from the value of a new car the minute it's driven off the showroom floor. Well, if that car is wrecked in the second minute, and the buyer had 100 percent financing, he or she is not likely to recover the full sticker price of the auto.

In fact, with cars seemingly costing as much as small starter homes nowadays, and 100 percent auto loans running five, six or even seven years, it may be a good while before the market value of the car closes that gap to equal the payoff amount.

Wentz says that some insurance companies will automatically extend gap coverage. But it's not the industry standard to do so. To find out which do and which don't, talk with your insurance agent.

Even if you own gap insurance and comprehensive, insurers do have a few little-known exclusions. Among them, damage due to acts of war or a nuclear explosion. But as one insurance expert says, if the nation gets into a nuclear war, dented cars may be the last of our worries.

Comprehensive policies, however, make no exclusion for acts of terrorism, even though there has been talk of building in such exclusions in policies in the wake of Sept. 11.

Comprehensive also kicks in when the sky literally falls in on your car. "The good thing about comprehensive is it covers you whether you hit a meteor or a deer," says Mr. Crowley.