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Why carry collision on your car?


Two men arguing after a car accidentQuestion: Why carry collision coverage on your car?

Answer:  If you don’t have collision coverage as part of your car insurance policy, you have no way to make a claim against your own insurance if:

  • You're at fault in an accident
  • You have a single-car accident
  • Your car is damaged by a hit-and-run driver, or
  • Your car is damaged severely when hit by an uninsured driver

In other words, without collision, you are out of luck unless the accident is clearly someone else's fault and that person is insured.

Your state-required liability insurance in no way protects your vehicle if it’s damaged.

State financial responsibility laws require car owners to have insurance to make sure that if a driver injures someone else or damages another person's property that he or she will have a way to compensate the other party.

But state laws don’t mandate that you cover your own car with physical damage coverages of collision and comprehensive, which protect your vehicle.  If you have a lienholder on your vehicle though, that financial institution normally requires you to carry both collision and comprehensive coverage on your vehicle.

Comprehensive, the other type of physical damage coverage, covers your vehicle for perils such as theft, fire, vandalism, striking an animal or damage from a natural event, such as a hailstorm.

What about uninsured motorist?

True, there is uninsured motorist property damage (UMPD), and it’s required in some states, but it only covers your vehicle if an uninsured motorist is at fault for the damage to your car.  In states that do offer it, UMPD can have limited benefits, such as paying only up to $3,500 -- which isn’t that helpful if your car is totaled.

Collision insurance pays for the cost of repairs or your vehicle’s actual cash value if it’s found to be a total loss, minus your deductible, as long as your vehicle was damaged in a covered event.  Hitting, or being hit by, another vehicle or object (sign, mailbox, tree, etc.), as well as the upset of your vehicle, is covered by collision – regardless of fault.

If you have a newer vehicle, then collision coverage is a must --unless you have enough cash sitting around that you could buy a replacement car outright if something happened to your present vehicle. 

If your vehicle is older and you wouldn’t pay to have it repaired if mechanical issues occurred, then collision may not be worth the cost, you’d have to do the math and see. 

If the cost of your collision coverage is the same or more than the value of your vehicle, then you definitely could drop it and just save that money to put toward a replacement car. (See “Is it time to drop comp and collision?”)

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