Do You Need Collision Coverage? What is Collision Coverage?

Two of the more frequently asked questions buyers have when buying or renewing a car insurance policy is what is collision car insurance and do they need it? While the answer to the first question is easy, the second question is a little more loaded and requires consumers to review several factors to make an informed decision.

Like a modern day insurance triumvirate of sorts, collision coverage, along with liability and comprehensive, makes up the foundation of most drivers’ car insurance coverage and covers any damages to a covered vehicle regardless of who caused the accident with another vehicle or a pesky mailbox.

Unlike liability insurance coverage, which is mandatory in most states, collision coverage, also referred to as auto collision coverage, is always optional unless the vehicle was financed by a bank or other lending institution which typically make it a mandatory requirement as part of their financing conditions. Collision is also typically mandatory for leased vehicles.

So now that collision coverage is explained, it’s time to answer the second question: does a driver need auto collision coverage? The answer there depends on a few factors.

Since it’s optional and the most expensive part of a car insurance policy it’s often dropped by drivers looking to save some money but drivers need to look to see if it’s mandatory as part of a financing or leasing agreement. If it is then there is no choice but to continue with carrying this coverage.

However, if the like the bumper sticker says “it’s paid for don’t laugh” the next question should be how much is the vehicle worth?

Unless it’s a classic car, as a car ages it depreciates in value and many drivers drop collision since the car is worth less than to insure. One way to determine the market value of car is to look it up in Kelley’s Blue Book or the NADA guide. It’s important to know what the worth because after a car wreck, a driver pays whatever deductible is on the policy and the insurance company picks up the difference which is the street value of the vehicle.

So while everyone’s financial situation is unique, there are several financial yardsticks a driver can use to determine if they should drop auto collision coverage. One way to decide is if a car’s book value is below a year’s worth of collision insurance premiums then it could be dropped. The money saved could be stashed away in a different account and could be tapped in case the car needs to be replaced. Another way to decide is if a car is worth less than $2,000 then the option could be worth more than the car and a driver should look at dropping it.

While it may seem too daunting a prospect to drop collision coverage, there are several other ways to save on car insurance premiums and have the peace of mind of keeping collision coverage.

Below is the AutoInsuranceMonitor Superb Seven Ways to save on car insurance coverage. The auto insurance website has made it its mission to provide answers to auto insurance most FAQs, as well give drivers convenient links to the top insurers in America like AAA, Esurance, Farmers and many more.

Higher Deductibles – This is a surefire way to save on premiums and typically the higher the deductible, the lower the premium. Drivers should note though that a high deductible means they will have a bigger repair bill in case they wreck their car.
No Tickets, No Accidents – Keeping a driving record free of tickets or accidents is sure to qualify for savings from 10-30% with almost all the top auto insurance providers.
LoJack and Co. – Anti-theft devices like car alarms or The Club will not only earn drivers savings but will help prevent the headache of having to deal with getting a car stolen. Even keeping a car garaged will help save money with some insurance companies.
Be Aggressive About Discounts – Drivers need to be diligent about inquiring what discounts they can earn since insurance companies give discounts on a range of things like professional affiliations to recent retirees.
Driving Defensively – Approved driving courses could help drivers earn from 5 – 10% off their insurance premiums. Drivers should check with their insurance provider to see what approved courses they will accept.
Aim High … On Credit Scores – Drivers with excellent credit not only get the best credit offers but also get the best insurance rates so as a driver’s credit scores improve they should share that good news with their insurance provider.
Safety Features – Drivers should always look for vehicles loaded with safety features to save on car insurance premiums. Examples of these safety features include air bags, tire-pressure monitoring systems, rearview cameras and daytime running lights.