Collision Insurance- An Overview

There are many different types of automobile insurance. This article focuses on Collision Insurance. The purpose behind collision and comprehensive insurance is to mitigate damages that may arise if your car runs into something. The legal premise behind this type of insurance policy is to protect when you cause damage.

Collision Insurance – The legal Process:

Lets say that you are happily cruising down the street, and a dog runs out in front of you. Reacting quickly you swerve, and as a result, your car leaves the road and you plow through a fence. The car comes to a stop, and both you and the dog escape any serious injuries. What happens now? Well legally, you are responsible for all the damage that was caused when you swerved to avoid the dog.

If there was no insurance coverage on the car you were driving, then you would be legally responsible for all of the damage that have just occurred in this accident.

Collision Insurance – The Differences:

There are a few different types of insurance that covers collision type accidents. In the above scenario, collision insurance would pay for the fence and any other damages. This is provided that the damages were not above the capitation amount of your policy. Capitation is the highest amount of money a policy will pay out. Some comprehensive insurance policies, that include collision damages, may even pay for damage that occurred to your car, but not all of them. It is important to pay attention to the difference in the types of collision policies. It is also important to pay attention to the maximum pay out values of insurance policies.

Collision Insurance – Automobile Insurance In General:

It is usually a good idea to review the limits of your entire automobile insurance policy at least yearly. This is primarily because the value of automobiles can change a log in a year. The total cost of insurance premiums for a year should be compared to the value of the automobile that is being insured. It makes little sense to pay high insurance premium on a vehicle that has value that is less then you may be paying in premiums. For example, if you pay $1500 a year in insurance premium and the value of your car is $1000, then in a year you have paid more than 1.5 times the value of your car. Does that make much sense? It certainly does not to me. Part of the premiums that are paid each year for car insurance is necessary to protect the owner of the car from liability.

Collision Insurance – Comparing The Costs:

Compare the different charges that make up the value of the policy. Some of these charges will be for medical coverage, while other costs will be for liability and some will be comprehensive. Obviously, medical coverage is necessary. This is the portion of the insurance policy that pays for you and your passengers when people are injured in automobile accidents. Liability insurance coverage is also necessary. This can be collision, or uninsured motorist insurance, etc. Liability insurance helps to protect the owner and driver of a vehicle from having to pay property damage, etc out of their own pockets. This is a necessary form of insurance. What about the portion of your policy that covers damage to your own vehicle? Should this be kept or discarded? The answer is not quite so straightforward as many of us may think it is.

Making the decision to drop parts of the insurance coverage from our insurance policies is a big decision. This is also a decision that is not always about saving money. Saving money, however, can be a good place to start the evaluation. The best process is to compare the value of the car that is insured to the cost of insuring it for comprehensive collision protection. If the car is leased of financed, then you may be stuck paying the limits that are imposed by the lender or even by the state government where you live. If the car is not financed then proceed with the evaluation of cost. Depending on what you come up with, a decision can be made to keep the comprehensive collision insurance or drop it. For some people, it is just a matter of cost, but for others they can take into consideration their driving record and make a decision that is based on both cost and risk. If you have a long and safe driving record, then maybe it is okay not to have comprehensive insurance coverage. This can work if the financial analysis of cost and car value are close. Maybe the vehicle is worth a little more than you would pay for comprehensive insurance. For some, this is an opportunity to save money, and they may accept the risk of what may happen, and save the money that would normally be spent on insurance that would fix their car.

Collision insurance is necessary to prevent drivers from paying for damages they case while driving. On the other hand, some drivers may not wish to pay for collision insurance insurance that would repair an older car, but would still need to be covered for damage caused by their car. For newer cars that are financed the limits of insurance are dictated by the lending agency. If you have an older car and have done the cost analysis of comparing insurance cost to car value, then it may be time to drop the comprehensive part of collision insurance.

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