If you don’t have collision insurance and someone hits you, their liability insurance will cover your expenses. Collision insurance could still be helpful if someone hits you and the cost to repair or replace your vehicle exceeds the limits of that person’s liability policy. And if the other driver is uninsured or unidentified, collision insurance is one way to avoid paying out of pocket for repairs.
You can use uninsured/underinsured motorist coverage to pay for repairs if you don’t have collision insurance and you’re hit by an uninsured or underinsured driver. Most states will also allow you to use uninsured/motorist insurance to repair your car if you’re the victim of a hit and run. However, some states – like California and Illinois – do not allow this if the driver is unidentified. If you’re hit by an unidentified, uninsured, or underinsured driver and do not have collision or uninsured/underinsured motorist coverage, you will have to pay for any repairs yourself.
Finally, if you’re hit by another driver and you don’t have collision insurance, it’s important that you document the accident as much as possible in order to file a successful liability claim. In addition to collecting the at-fault driver’s insurance information, you should take pictures of the damage and the scene of the accident. You should also file a police report and notify your insurance company about the accident.
If you have no collision coverage, then you will be responsible for paying to repair or replace your car after an accident that you cause. When you’re at fault in an accident, your liability insurance will only cover the other driver’s expenses, not yours. Collision insurance is not usually needed if the other driver is at fault, since their liability insurance will pay for damage to your car.… read full answer
Collision insurance can sometimes be helpful after accidents when fault isn’t clear. If you have collision insurance, you can file a claim with your own insurance company while you wait for the insurance adjuster to make an official judgement of fault. Then, if the other driver is determined to be at fault, their insurer will reimburse yours.
Not having collision coverage can also make a claim difficult if you’re hit by an uninsured or unidentified driver. Unless you carry uninsured/underinsured motorist coverage, your only option is to sue an uninsured driver. Still, you’re unlikely to collect anything if you win, as a driver without car insurance is more likely to be unable to pay damages. And some states don’t allow you to use uninsured/underinsured motorist coverage after a hit and run, which means you’ll have to pay for the damage yourself.
It’s generally a good idea to carry collision insurance if you can’t afford to pay out of pocket for repairing or replacing your car. On the other hand, if you have the financial resources to repair or replace your car, you can usually consider dropping collision coverage if the cost exceeds 10% of your vehicle’s value.
You should drop your collision insurance when your annual premium equals 10% of your car's value. If your collision insurance costs $100 total per year, for example, drop the coverage when your car is worth $1,000. At that point, your insurance payments are too close to your car's value to be worthwhile. Drivers can easily find a car’s value with the online vehicle appraisal calculators from Edmunds or Kelly Blue Book.… read full answer
The 10% rule for dropping collision insurance is not set in stone. But it’s a good milestone to keep in mind because as the value of a vehicle falls over time, the value of its insurance coverage does too. And when you start paying a significant portion of your car’s value in premiums each year, you’re simply overpaying to offset the actual level of risk that remains – at least as far as collision damage to your own vehicle is concerned.
Collision insurance repairs or replaces your insured car if it's damaged, whether by another vehicle or an object like a tree or mailbox. This insurance covers up to the cash value of your car - which is where the 10% rule comes in. This rule most frequently applies to older cars or vehicles with a lot of mileage, as they are worth relatively low amounts. There are a few other situations where it might be a smart move to drop collision insurance, too.
When to drop collision insurance
When you rarely use your car
The more you drive, the higher your risk of being in an accident – so if you don’t drive often, your risk is lower than average. That means you could be paying for collision insurance that you’re unlikely to need.
When repairing a car would not have a big impact on your finances
Maybe you have an emergency fund that you could use to fix your vehicle. If you're willing to spend your savings on car repairs, then it's safe to drop collision insurance. However, people often prefer their emergency fund to be a safety net for when they leave their job, face health issues, or need home repairs. It all depends on what you're comfortable with personally and how much you have saved.
When you’re paying 10% of your car’s value in premiums annually
The cost of repairs goes down as your car gets older, so you don’t want to overpay as your car loses value.
When NOT to drop collision insurance
Every state requires car insurance except for New Hampshire and Virginia. However, the law doesn't mandate collision insurance. The only legally-mandated car insurance is liability coverage, for damages to someone or something that you accidentally hit with your car. Although collision insurance is optional, it's well worth purchasing for many people.
If you're financing your car, collision insurance is usually required. Otherwise, you might be stuck with a repair bill equivalent to the value of your new vehicle! If you're leasing your car, the same logic applies – most lessors require drivers to carry collision insurance, too.
In summary, it's a smart money move to drop collision insurance when your car is old or has high mileage, but you should definitely think twice about doing so.
No, you do not have to pay a car insurance deductible when not at fault unless you file a claim with your own insurance. Usually, the at-fault driver's liability insurance will cover your expenses after an accident, but you may want to use your own coverage if fault is undetermined or the at-fault driver is uninsured.… read full answer
It can sometimes take the insurance adjuster a long time to determine fault, which can affect when you receive compensation from the at-fault driver. In that case, you can file a claim with your collision insurance, personal injury protection, or MedPay coverage in order to pay for the cost of repairs or medical bills in the short term.
You will have to pay a deductible for collision coverage and personal injury protection, but your insurance company will eventually recoup your costs through subrogation with the at-fault driver’s insurer. However, if you are partially at-fault, then your expenses may be reimbursed in proportion to your fault or not reimbursed at all, depending on your state.
If the other driver is uninsured or doesn’t have enough coverage to pay for your expenses, you can file a claim with your uninsured/underinsured motorist insurance, if you have it. Uninsured/underinsured bodily injury coverage pays for your medical expenses and does not require a deductible. If your car is damaged, your uninsured/underinsured motorist property damage coverage will pay for repairs, and in some states you will have to pay a deductible.
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