single car accident 3Like other responsible drivers, you carry the appropriate auto insurance coverage. You know the state mandates a minimum level of liability coverage, but you have way more than that to cover “the other guy.” But what about your own about your own vehicle and its contents? That is what comprehensive and collision insurance is for. For this blog entry, we will focus on collision coverage.

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.

It is always a smart move to discuss all of your coverage needs with your insurance professional. They can explain which coverages you currently have, which ones may not be necessary anymore, and which ones you are lacking.