- No comments
Auto liability insurance will cover personal and property damages you cause while driving your vehicle. It is mandated by the state of California and all but a few drivers should carry above the minimum limits. There are also coverages like uninsured and underinsured motorist, which applies in cases where the other drive doesn’t follow that last piece of advice. Then there’s the coverage – collision — that applies to your vehicle should it be damaged but not covered under another driver’s liability insurance But what does it cover, and is it worth it?
Collision insurance covers some or all repairs or replacement costs to your vehicle due to an accident with another vehicle or if you hit another object (tree, wall, etc.), if you are in an accident with another vehicle, drive into an object such as a tree, building, or telephone pole, or other types of damage. You are not required by law to carry collision coverage, but if your car is financed, your lender will almost always oblige you to have that insurance.
If you opt not to purchase collision coverage, your lender can do it for you, something called “forced placed” insurance and charge you a premium along with your monthly payment. Collision insurance covers the vehicle, not you, and that’s what the lender is concerned with. Premiums for this type of insurance can cost up to five times more than if you had purchased collision coverage through your own insurer.
To figure out if you need collision coverage on a vehicle that is paid off, first calculate its value using a resource like the Kelley Blue Book. Then think about whether or not you can afford to replace your car on your own, remembering that the insurance company will only pay you how much it’s worth, less any deductible.
If you currently have collision insurance but are considering dropping it, you will save some on your premium. To a large extent, the cost is based on your driving history, the value of your vehicle, and the size of your deductible. If you have been in more than a few at-fault accidents, you are probably paying a higher premium for that coverage. Depending on the age and condition of your vehicle, it may make sense to reconsider.
Have a conversation with your insurance professional about collision coverage and see if it is right for you. As was explained above, sometimes you don’t have a choice about whether to carry collision. But when you do, talk to your best insurance resource and see if you should.