June 17, 2011

Not Having Collision Insurance And What It Means For You

Auto insurance coverage is expensive. That is why when most of us go shopping for car insurance we tend to look for only the amount of coverage that is required by either our state or our finance company and forgo any of the added extras in a bid to save a few dollars a month. But is opting out of collision insurance really such a smart idea?

The fact is that most states do not require you to have a collision insurance policy as part of your mandatory requirements so unless the vehicle is financed most people will skip this important coverage. But collision insurance is an important part of your “whole” vehicle auto insurance coverage.

What is collision insurance?

Collision insurance is a type of auto insurance coverage that pays for any damages to your vehicle in the event that you are “at fault” for an accident.

We know that no one wants to admit that they are “at fault” in an accident of any kind, and the truth is that no accident is ever 100% the fault of any single circumstance but is a series of unfortunate events. But since accidents do occur, it is a good idea to make sure you are protected from the fallout. That is why we have auto insurance coverage in the first place right?

You see, without a collision insurance policy if you do get into an accident and you are found at fault you will be responsible for 100% of the damages to your own vehicle.

How does collision insurance work?

The way that collision insurance coverage works is simple really. If you are involved in an accident of any kind with your vehicle that is termed to be your “fault” then the auto insurance coverage company will pay the bills for the repair to the vehicles or in the event the vehicle is a “total loss” they will pay the owner of the vehicle the “fair market value” of the car.

Is there a deductible

Collision insurance is a “deductible” auto insurance coverage so you will need to decide how much you are willing to pay out of your own pocket toward the repairs to your car. Remember that the higher the deductible you choose, the lower your premiums will be.

Who should purchase collision insurance?

Although collision insurance is a good idea for most of us it is not auto insurance coverage that everyone needs to have. If your vehicle is worth less than your collision insurance deductible amount then it is a good idea to skip this policy. If your vehicle is worth more than $1,000 or if it is financed then you should purchase this coverage.