Collision insurance is an optional coverage that helps you replace your car or pay for repairs after an accident, regardless of fault. Although this type of coverage is not required by law in any state, it may be required by your lender when you purchase a new car.
You should drop full coverage insurance on your car when the cost of the insurance equals or exceeds the potential payout, should a covered event occur. You may also want to drop full coverage if you are willing to pay for repairs out of pocket, or if you would prefer to replace your vehicle if it’s damaged. … read full answer
For example, an older car with high mileage may not be worth costly repairs, and you might want to save for a new car instead of paying for extra insurance. Similarly, a driver who uses their car infrequently might take the gamble of dropping full coverage, since they are statistically less likely to damage their vehicle.
You should consider dropping full coverage car insurance when...
Your car is old or has a lot of miles. The less valuable your car is, the less likely it is that you need much coverage beyond your state’s requirements. A good rule of thumb is that when your annual full-coverage payment equals 10% of your car’s value, it’s time to drop the coverage.
You have a big emergency fund. If you don’t have any savings, car damage might leave you in a severe bind. In that case, the money you spend on full coverage insurance will protect you from insurmountable repair bills. Consider keeping your full coverage insurance until you have some savings built up.
For those who aren’t quite sure what it means exactly, “full coverage” is a catch-all term for insurance that covers you, other drivers, and your vehicles. It generally includes both collision and non-collision insurance. In other words, there is no single policy for "full coverage" car insurance. Instead, you select a combination of coverages that you feel is enough to handle all aspects of a car collision. With a well-rounded collection of coverages, you are “fully” protected from a variety of vehicular hazards, ranging from injuries and collision damage to weather events, encounters with wildlife, and vandalism.
However, it’s important to remember that different states require different levels of coverage. Make sure to check state requirements before making any changes to an insurance policy.
With that being said, it’s wise to get full coverage for a new, rare, or expensive car. A $40,000 truck is worth the few hundred dollars a year for full coverage insurance, for example. Otherwise, you run the risk of having to drop another $40,000 on a new truck if you’re involved in a serious accident.
No, collision insurance does not cover the other car in an accident. Collision insurance only pays to repair or replace the policyholder’s car when it is damaged in an accident, regardless of who is at fault for the wreck.
If the policyholder is at-fault, their property damage liability insurance will cover the damage to the other driver’s vehicle. And if the other driver is at-fault, that driver will need to pay for their car’s damage with their own collision insurance policy, if they have one.… read full answer
It is usually better to have comprehensive insurance than collision insurance, if you need to choose between the two. Comprehensive coverage is inexpensive, can be purchased alone, and covers events outside of a driver’s control, such as vandalism, theft, natural disasters or run-ins with animals, among other situations.
On the other hand, drivers with a history of accidents or moving violations and drivers who live in high traffic areas should consider investing in … read full answercollision insurance. Given that collision insurance cannot be purchased without comprehensive, you’ll get the benefit of both types of coverage.
Why You Should Get Both Comprehensive & Collision Coverage
If your car is leased or financed, your lender or lessor will likely require you to purchase comprehensive and collision insurance together. But even if you do have a choice, you should still consider purchasing both types of coverage.
Collision and comprehensive insurance are best bought together because they cover different situations. Collision coverage repairs or replaces your car when it’s damaged in an accident, regardless of fault, while comprehensive insurance applies when your car is damaged by something other than an accident.
Ultimately, if you’re still struggling to decide whether to purchase comprehensive or collision coverage, a good rule of thumb is to skip either type if the cost is more than 10% of your car’s value. However, this is just a general guideline, and you should also consider whether you’re in the financial position to repair or replace your car if it’s damaged.
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