Collision Auto Insurance
Collision insurance is a coverage that helps pay to repair your car if it is damaged in an accident or with another vehicle or object. This coverage is usually not suited for older vehicles. It is also often referred to as “full coverage insurance”. Collision insurance is not required by state law to carry when driving a vehicle. If you are financing your vehicle this coverage will be required with your finance company. If it is not financed then the coverage would be optional. Even though your car may be paid off if the value of the car is high enough it could still be in your benefit to carry collision insurance to protect yourself in the event of an accident.
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Comprehensive coverage goes hand in hand with collision coverage. You cannot purchase just collision insurance, comprehensive has to be added too. Some companies however will let you purchase comprehensive coverage only without collision coverage. These 2 coverages are also known as “full coverage insurance” this term is not a true insurance definition but is used by almost everyone in the industry. If you are in an accident and the other driver was entirely at fault their property damage liability insurance would pay for the damage done to your car. All drivers on the road are required to carry this coverage but unfortunately many people still drive without this coverage putting people who do not carry collision coverage at risk. Collision insurance does cover you if an uninsured motorist damages your car in an accident.
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Collision coverage deductible and coverage options
When you choose collision insurance coverage on your auto policy you will have to choose a deductible. The deductible is the amount you pay before your coverage begins to pay for your claim. You choose the deductible during the auto insurance quote itself prior to paying for the coverage. Here are the deductible options you can choose from:
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The $750 and $2000 deductible are not very common. Progressive and equity are some of the few companies that offer the $2000 option. The $750 deductible we found Save Money Car Insurance and Farmers are some of the few that offer that coverage. It is important to remember that the lower deductible you choose the higher your monthly rate will be and vice versa the higher deductible is the lower your monthly premium is. But it needs to be noted that if an accident occurs the higher the deductible is the more money out of your pocket, so it is a gamble in a sense.
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If you choose a $1000 deductible for example and you had an at fault accident you would have to pay $1000 towards the repair costs. The value of the vehicle is a very important factor in choosing a deductible.
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Let's say your vehicle is totaled in a covered accident. Your auto insurance company would issue you a check for the actual cash value of the car at the time of the loss, minus your deductible. Be sure to remember the actual cash value of the vehicle may not replace your old car with a newer one. You would have to cover the difference in price.
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Do I need collision insurance?
If your car is financed the lienholder will require you to carry collision insurance. If you fail to carry collision insurance the lienholder can put “forced place coverage” onto your car payment which can be very costly. This is not true state required insurance but just a collateral protection to protect the finance company. There is no liability coverage on this forced place policy which is what the state requires you to carry. If you were to get pulled over carrying only forced place insurance your license can be suspended due to not carrying the state minimum limits of liability insurance.
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As you can see in most all cases it is best to purchase collision insurance from your primary auto insurance carrier to be sure you are covered correctly. Be sure to not let your auto insurance policy lapse during your loan period. If it doesn’t the lienholder will be notified and they can add the forced place coverage on and raise your monthly car payment dramatically.
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How to decide if you need collision insurance for a vehicle that is paid off
If your car is paid for it is important to figure our first of all how much its worth. We found Kelley Blue Book is a good online tool that can tell you how much your car is worth. Once you have established how much your car is worth you will need to ask yourself a few questions.
First question: Can you afford to replace your car out of pocket?
If you do not have the extra cash to replace your car in case it is totaled it may be worth purchasing collision insurance. If you do have the funds to replace your car if it is totaled and your car is older than it may be time to start thinking about not purchasing collision insurance and going with liability only.
Second question: How old is your vehicle?
If your vehicle is over 20 years old, we recommend not purchasing collision insurance. Due to an auto policy paying the value of the car at the time of the loss it is not worth paying the higher monthly premium for collision insurance when the value you would get on an older car is not worth very much.
Here are a few other questions to ask yourself when deciding on purchasing collision insurance or not:
- How much money will I save by not carrying collision insurance?
- How much money is at risk?
- Is it likely I will be in a situation where I have to replace my car?
The last question may be the most important. What kind of driver you are really determines if you should carry collision insurance or not. If you are prone to having accidents it may be wise to purchase collision insurance to be safe. But if you have never been involved in an accident and are a safe driver than maybe it's worth the gamble and just doing liability only insurance.
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As far as checking on how much money you will save by not carrying collision insurance you will need to get as many quotes as possible. This will increase your chances of finding the cheapest policy possible. Collision insurance prices increase dramatically when your driving record is bad. The more tickets and accidents you have the more collision insurance will cost.
Also, where you live is a factor on carrying collision insurance or not. If you live in a large metro area that has heavy traffic and uninsured motorists and it could just be a matter of time until you are involved in an accident than it may be wise to carry collision insurance. But remember collision insurance rates in metro areas can be very expensive. Heavy traffic and uninsured motorist claims cost insurance carriers a lot of money. On the opposite end of the spectrum, if you live in a rural area with not traffic then collision insurance will be much cheaper and your likelihood of having an accident are much less.
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How much does collision insurance cost?
Collision insurance usually costs about twice as much as liability only does. This is because the risk for an auto insurance company to pay out on collision insurance is much greater than a liability only policy is. Uninsured motorist claims, flood, and hail claims cost insurance companies lots of money each year in paid claims. These claims are not covered on a liability only policy which makes this kind of policy much less of a risk. Here are a few major factors that affect the price of collision insurance:
- Driving record
- Claims history
- Zip code you live in
- Value of your vehicle
High risk drivers are the ones that pay the most for collision insurance. These are drivers with a bad driving record. If you are a high-risk driver needing collision insurance, we recommend contacting a nonstandard auto insurance broker or company. These are insurance agents and companies who specialize in hard to place situations.
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Why buy collision insurance?
If you have a lienholder on your vehicle or leasing it then collision coverage will be required. Most lenders and lease holders will require it. If your car is not financed then the coverage will be optional. Something to consider when deciding on collision insurance is to determine how much it will cost to repair your car when it is damaged in an accident. Purchasing collision insurance would give you coverage in this circumstance.
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Concluding thoughts on Collision Insurance
As long as you have a good driving record for the past three years collision insurance should be affordable and a good way to protect your car and finances. A general rule of thumb is if 3-5 years' worth of collision insurance premiums exceed the value of the car, removing collision coverage could be a smart move, as long as you have the finances to repair the car in case its damaged. You can instead save the monthly premiums and put the money toward more productive purposes.
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Collision Insurance FAQ’S
What does collision insurance cover?
Here are a few things covered under collision coverage:
- Collision with another automobile
- Collision with an object
- Single car accident where car is damaged
What is not covered by collision insurance?
Here are a few things not covered by collision insurance:
- Damage to your car that is not related to driving like hail damage or theft
- Damage to someone else’s automobile
- Medical bills
What is a collision insurance deductible?
A collision insurance deductible is the money you pay out of pocket in the event of a covered claim. The insurance company will then pay the rest of the damage after your deductible amount.
What is a collision deductible waiver?
A collision deductible waiver is an endorsement that insurance companies add on to a policy that either lowers or waives the deductible. Many smaller companies don’t offer this endorsement mainly just the larger national companies. Customers like this endorsement it can be very beneficial for them in case they are involved in an accident.