WalletHub, Financial Company
@WalletHub
Yes, you need collision insurance if your car is leased or financed. Collision insurance is not required by any state laws, but most lessors and lenders require drivers to have it until the car is paid off. Even if you’re not required to have collision insurance, you should still purchase it if you cannot afford to pay for damage to your vehicle after an accident.
Why You Need Collision Insurance
Collision insurance pays to repair or replace your car after an accident, regardless of who is at fault. If you cause an accident, collision coverage is the only way to have your repair costs covered by insurance. Even if you are not at fault for an accident, you can file a collision claim to pay for your repairs while you wait for a final determination of fault. Your insurance company will then recoup your costs from the other driver’s liability insurance.
Factors to Consider When Deciding if You Need Collision Insurance
- Price of coverage
- Car value
- Likelihood of an at-fault accident
- Cost of repairs
When to Consider Dropping Collision Insurance
A general rule of thumb is that if your collision insurance premium is more than 10% of your car’s value, you can consider dropping the coverage. However, this is just a general guideline. If you can’t afford to pay out of pocket to repair or replace your car after an accident, then you should continue to carry collision insurance. You should also keep it if your car is particularly valuable or you live in a high-traffic area where you are more likely to get into an accident.
Scott W. Johnson, Manager and Principal Broker Agent
@Marindependent1
Great Question, thanks for asking.
Deciding on getting Collision Insurance is a personal decision however it is made more complicated by the financials involved.
In general it depends on the person or couple asking the question.
First off, what is your auto worth?
Second, how much money do you have saved up either for your next car, or in a an emergency account. If you have enough money saved up to pay for a new car, then you may not need Collision Insurance.
Next (third) you need to find out how much Collision Insurance costs you. This can be a bit mor complicated than just reviewing your Auto Insurance Declarations page. You may need to contact your independent insurance broker to ask them.
Last, (assumign you have enough money to replace the vehicle yourself) you need to evaluate if the cost of the insurance per year is worth the amount that it would be to fully replace the automobile.
As I said its a personal decision made more complicated by the numbers.
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