David Smith Shares Insights on Comprehensive vs. Collision Insurance in WalletHub

When purchasing auto insurance, many drivers are faced with the decision of whether to add collision coverage, comprehensive coverage, or both. Understanding the differences between these two policies is key to making informed choices, yet the distinctions are not always obvious. In a recent feature for WalletHub, David Smith, Senior Associate Provost and Professor of Economics at Pepperdine Graziadio Business School, offered expert insights on why these coverages are so often bundled together by insurers.

Collision insurance helps pay for repairs to a driver’s own vehicle after striking another car, a stationary object, or a road hazard. Comprehensive insurance, on the other hand, protects against non-collision incidents such as theft, vandalism, fire, or natural disasters. Together, the two types of coverage create what is often referred to as “full coverage” auto insurance, providing broader protection against the unexpected.

Smith explained that bundling comprehensive and collision is both a practical and strategic choice. Offering the coverages together simplifies the underwriting process and pricing for insurers, eliminating the need to maintain separate actuarial models for each type. At the same time, it provides consumers with convenience and reassurance, ensuring they are not left vulnerable to damage simply because they purchased the wrong type of policy.

By examining the economics behind insurance design, Smith emphasized that bundling is a way to align the needs of both insurers and policyholders. The practice reflects an industry preference for efficiency, while also giving drivers greater peace of mind knowing they are covered against a wide range of risks. His contribution to WalletHub underscores the importance of financial literacy in helping consumers understand the value of comprehensive protection.

Read the full article here.