July 27, 2011

Top Reasons To Carry Collision Insurance On your Vehicle

Collision insurance is an important form of auto insurance coverage that provides a payout when the policyholder's vehicle is damaged in an accident. Despite the fact that this essential form of car insurance coverage offers valuable protection that can save a driver thousands of dollars, many policyholders opt out of carrying collision insurance.

One of the most important reasons to carry collision insurance is that it may be required, especially if a vehicle is being purchased through a bank loan. Banks require collision insurance because it protects their interests; they're lien holders, so they need a way to ensure that if a driver's car is totaled in an accident, the bank or credit union will still receive the required funds to pay off the loan. Collision insurance is required by every bank and credit union that offers auto loans, along with comprehensive insurance coverage equal to the value of a vehicle. Keeping collision insurance as part of auto insurance coverage ensures that a driver is keeping up with the terms of his or her loan agreement, and if a driver doesn't provide regular proof of this coverage, the bank has the option to buy the coverage for the driver. This is usually far more expensive for a driver, as banks don't look for the best rates when buying insurance to fulfill the terms of a loan agreement.

Some drivers don't purchase collision insurance because they drive infrequently, and as such, they assume that the possibility of a claim is fairly low. However, most accidents occur within three miles of a driver's home, and regardless of the value of a vehicle, collision coverage can save a driver a tremendous amount of money. A totaled car can stop a driver from getting to work and earning; a single accident can prevent drivers from making enough money to get by, leading to a host of financial issues. Liability coverage isn't enough. Drivers also sometimes confuse collision coverage with comprehensive coverage, so they only buy one or the other. Comprehensive coverage is a separate form of coverage that provides payout when a car is damaged by something like a falling tree limb or a theft attempt. It's not the same as collision insurance, and both forms of coverage are necessary to keep a vehicle fully protected.

The cost of collision coverage can be high for some drivers, especially drivers who have made a claim on their auto insurance coverage or drivers in high-risk groups. Nevertheless, drivers should look into ways to make this coverage affordable. By checking prices from a few insurance providers and getting discounts, any driver can afford this essential coverage.