Collision insurance is useful if you drive a car and don’t want to risk paying out of pocket for damages during a road traffic collision. However, some people are actually wondering whether it is needed. This guide will help you decide when to drop collision insurance and how to determine what level of coverage you need.
The Difference Between Comprehensive and Collision Insurance
Collision coverage will protect you for any collision, no matter whether you were at fault or not. It also covers you when you collide with another object or stationary vehicle, not only traffic accidents.
On the other hand, comprehensive insurance covers everything that is not related to a collision, such as fire, theft, damage due to extreme weather, and even vandalism. While many people assume that comprehensive equals full coverage, this is not the case. Any accident involving another vehicle is covered by collision insurance.
What Collision Insurance Covers
According to Insurance.com, collision insurance covers:
- Hitting an object in your way, such as a post or a tree
- Hitting a building with your car
- An object falling on your car
- Accidents due to a high curb or potholes
- Being hit by another vehicle
- Hitting another car while backing out of a parking space
Anything outside of these scenarios is covered by comprehensive or liability insurance.
What Collision Insurance Doesn’t Cover
Collision insurance will not cover:
- Fire
- Theft
- Vandalism
- Natural disasters or extreme weather
- Accidents with animals
- Damage caused by branches or stones, including damage to your windshield
- Civil disturbance
If you would like the insurance company to pay for the damages caused by the above scenarios, it is recommended that you seek additional insurance policies.
When to Consider Dropping Your Collision Insurance
There are certain situations when you might not need collision insurance and could consider dropping it. The Balance provides a comprehensive list of these circumstances:
- If you don’t use your car or drive only occasionally.
- If your car is not worth a great deal, and you are paying more than 10 percent of its value in annual insurance costs
- If the cost of repairs would be below your deductible amount
- If you are planning to replace your car instead of getting it repaired after an accident
If you feel like paying for the repairs yourself will not cause financial hardship, you might consider dropping this coverage. It might be better to pay out of your savings and keep a lower premium than making a claim.
Always weigh the pros and cons and see if you can pay for the repairs out of pocket. If you own an older vehicle that is common and cheap to repair, you could pay out of pocket instead of making a claim and getting your premiums increased.
You need to remember that when your car is damaged beyond repair, the insurance company will take into consideration the actual cash value of the car. It is the valuation of your vehicle before the accident, and they may not allow you to replace it.
You could also consider dropping your insurance if the car is covered by another driver, such as a family, member for collisions.
Is Having Collision Insurance Required By Law?
None of the states in the U.S. require you to have collision insurance. That said, even though it is optional protection, you will have to consider what happens if you are involved in a road traffic collision. Will you be able to cover the cost of repair and other expenses or replace the car? If the answer is no, you might want to add this coverage to your policy.
If you have financed a car, your lender might require you to take out collision insurance. They will want to protect their interest and reduce their risk.
Is There a Deductible for Collision Coverage?
Collision coverage comes with a deductible, and you will have the option to choose the amount you are willing to pay before the insurance company steps in and pays for the rest.
The most common deductible amounts for collision coverage are $250, $500, or $1000. This means that if your car costs $300 to fix and you have a deductible of $250, you will have to pay the mechanic the $250 before the company pays the balance of $50.
If, however, you own a high-value car or your vehicle is paid off, with the total damage of $1,500, you will pay only $250 and the insurance company will pay $1250.
The Cost of Collision Insurance
When it comes to collision coverage, the prices differ from one state to the next. Nationwide costs about $596 a year on average to have this coverage. Of course, the prices will depend on what you drive, how long you have been driving, and your credit and driving history.
How to Save Money on Collision Insurance
There are certain things you can do to ensure you get the best deal on collision insurance. First, bundling different coverages, such as liability, collision, and comprehensive, might get you a discount. Second, you might want to consider the insurance cost before choosing your ride. Other aspects car insurance companies take into consideration when calculating your annual collision coverage premium include:
- The mileage you cover each year
- Your credit score
- Your driving history
- Your deductible amount (the higher the deductible the lower the premiums)
Even though collision insurance is not a part of a minimum required level of coverage in any state, it is a valuable product to have. Without it, you might find yourself in financial trouble, having to pay for everything out of pocket. If you are not sure whether or not you need this protection, always consider if you will be better off financially with or without this type of insurance.
Check this out if you need additional information, resources, or guidance on car insurance.
Sources:
Comprehensive and Collision Auto Insurance
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