Collision coverage: Protect your car from damages

Collision coverage will pay for any damages that your car may suffer due to collision with some other car or object. You may or may not choose to have this coverage. Many of you who own older cars may not like to purchase this policy. However, for those of you who have a new car, you may care to purchase this policy since repairing a new car can be expensive. If you do not have such a policy in place, you will have to pay out-of-pocket.

What does collision coverage include?

You may be a very cautious driver, but the fact is that accidents happen. If your car sustains damage due to the accident, having collision coverage helps. Car repairs can be a costly affair. Collision cover helps provide financial coverage to repair your much loved car if it gets damaged in an accident.

Even if you are a very careful driver, you may get involved in an accident. If it is not your fault, you can claim compensation for collision from the party at fault. But, if the accident is because of your fault then you cannot collect for the damages incurred. This is where collision coverage comes in to play. The good part is that collision coverage will pay for the damages even when the accident has not been your fault.

Do you need collision coverage?

Take a look at the top 3 reasons why you may need this coverage:

1. An accident is your fault and there has been severe damage to your car. You cannot collect compensation from the other party. Collision coverage will pay for the damages.
2. You think an accident is the other party's fault but the other party denies the charges. If you have a collision policy in place, you can get your car repaired and then your insurance provider can subrogate the other party for your claim. However, you may or may not be reimbursed the deductible in the full amount or even part of it.
3. You are involved in an accident with a third party that does not have liability insurance.

However, if you have an old car that is in very poor condition and is not expensive too, then getting auto insurance collision coverage is not a good idea. Since such coverage is based on the actual cash value of your car, it is not a good idea to purchase it if the market value of the car is lower than what you would pay as premiums. In such a case you may like to drop collision coverage.

How much collision coverage do you need?

How much coverage you will need depends on the type of vehicle you own and few other factors. You are likely to pay a higher premium for the following few reasons:

• You own an expensive car
• Your driving history reveals you to be an accident prone driver
• Your car gets easily damaged
• Your car is hard to repair
• Your car has been stolen frequently

However, if you have a good safety record you may be lucky to get a lower premium.

How much will collision coverage pay you?

The basic factor on which depends the amount of coverage that you will receive is the worth of your car, what parts will be used to repair it and few other factors. Insurance companies pay only the Actual Cash Value (ACV) of the car. By ACV we mean the market value of the car before the accident occurred.

You will find several sources by which you can easily determine the actual cash value of your car. Your insurance company may have their own set of rules on how to determine the ACV in the area you reside in. Remember sun damages, dents and torn upholstery may lower the actual cash value of your vehicle.

How much deductible should you pay?

When you choose a deductible in collision coverage remember that this is the amount that you have to pay out-of-pocket. So, the amount that you choose must be affordable by you. Another important fact to remember is that the higher your deductible the lower your collision coverage premiums. However, this is a choice that is to be made by you depending on the financial grounds you are in.

Unlike the bodily injury liability, collision coverage is not mandatory in any state. It is entirely your choice whether you want to purchase this coverage. However, you may be obliged to purchase such coverage if you have leased the vehicle or have a lien on your car.

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