The difference between the car insurance that most states require you to have (also known as liability insurance) and collision insurance is that collision auto insurance pays for any repairs to your car if you get in a collision, no matter who is at fault in the collision, whereas required insurance typically only pays for repairs to the other person’s car. There are a number of reasons to get car collision insurance coverage, particularly if your car is new or worth a lot of money. The standard rule of thumb is, if your car is worth less than what you’re going to be paying in insurance over the next several years, it’s not worth it. Otherwise, many insurance analysts recommend getting automobile collision insurance, because you don’t know what could happen, and you could be out a lot of money.
You may think that you’re a careful driver and you’ve never gotten into an accident that was your fault, but the very definition of “accident” means it could happen any time, no matter what you do. Finding fault is a often complicated process, especially when the person you collided with decides to take you to court. Often times collision car insurance can reduce a lot of stress, because it ensures that you won’t have to pay for an accident no matter what. Through a process known as subrogation, your auto insurance company can take over your end of the legal proceedings as long as you have collision coverage.
Auto collision insurance also covers collisions with inanimate objects, which you obviously can’t sue for money. If you spend any amount of time driving in bad weather or under poor visibility conditions, this can be a vital purchase, because no matter how careful you are, sometimes there’s a patch of ice in the road you can’t see. Collisions are stressful enough without having to worry about money.
In addition, if you get into an accident with someone who is driving without liability insurance (despite the illegality of it in many states), you may end up being out of luck. To avoid getting into long protracted legal battles, purchasing collision damage insurance is a sound financial decision. If you’re in a hit-and-run accident and fail to get the person’s license number, while it isn’t fair, as long as you haven’t purchased liability collision insurance you won’t get a penny from your insurance company’s insurance collision center. You’ll end up paying for everything out of pocket.
There are two types of collision insurance coverage, which is important should your car be totaled: replacement-cost coverage and actual cash value coverage. They may seem the same, but be sure to read the fine print and ask your insurance agent which one you’re getting. Replacement-cost coverage will give you however much you need to purchase the same make, model, and year of the insured car, while actual cash value coverage will only give you the amount of money your car is worth, depending on the mileage and whatever other issues it had prior to the crash.
Collision insurance is different from comprehensive insurance, though they are often offered together as an optional package by most auto insurance companies. Basically, collision covers collisions with objects, people and cars, and comprehensive covers everything else (such as weather damage, theft, and vandalism). Many auto companies require you to get both collision and comprehensive insurance if you’re leasing a car from them. This is to protect their investment by insuring that you are able to pay them the cost of your car, no matter what might happen.
Purchasing collision insurance is almost always an excellent investment in your future and your peace of mind. The only reason not to buy it would be if your car is cheap and not worth whatever you’d end up paying over several years to keep it collision-insured.
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