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Do I Need Collision Coverage in My Car Insurance?

written by: Eric Stolze•edited by: Jason C. Chavis•updated: 4/26/2011

Can you do without collision coverage or is collision insurance worth the higher auto insurance premiums? Collision is not legally required for all drivers, but some drivers will have to carry it. You need a few helpful hints before you decide to buy collision coverage for your vehicle.

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    How Does Collision Coverage Work?

    Wrecked car in Durham 

    You may ask yourself, "Do I need collision insurance on my car and what is it exactly", simply put collision insurance covers the costs to repair damage to your vehicle that results from an accident which you caused. Collision coverage is a very common part of most auto insurance policies and if you are in an accident which was another driver’s fault, then that driver’s insurance will cover the repair costs of your vehicle.

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    Total Loss

    Collision coverage may also pay to replace your damaged vehicle. If the estimated cost to repair a damaged vehicle is close to what its appraised value was prior to an accident, then insurance companies will declare the car a total loss, or total the car.

    The insurer will take the damaged car and sell its parts to a salvage business. The insurer will issue the insured driver a check equal to the prior appraised value of the totaled vehicle. The driver can use the insurance money to buy a replacement vehicle.

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    Collision Limits

    Collision insurance is sold with two coverage limits. A deductible is the maximum amount that a driver must pay out of his own pocket before the insurer will begin paying collision claims. The total coverage limit is the maximum amount that the insurer will pay to repair or replace the vehicle after the driver has paid his deductible.

    If a driver has a $500 deductible and a $100,000 coverage limit, then the driver will need to pay $500 to repair damage before the insurer even pays a penny. A driver’s collision insurance premium will increase when the driver increases his total amount of coverage or when the driver decreases his deductible.

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    Is Collision Required?

    Collision coverage is not legally required for all drivers. If you take out a loan to purchase a car, the lender may require you to maintain collision coverage as a condition of your auto loan. Financial institutions that lease vehicles may also require collision coverage as a condition of an auto lease.

    Most car owners would be wise to purchase collision coverage for their vehicles, especially owners of newer vehicles. As the appraised value of a used car goes down, a point will be reached where it would be cheaper for the car owner to drop his collision coverage. The car owner without collision coverage would replace his used car if he causes an accident that leaves him with high estimated costs of repair.

    Many car owners use $4,000 in appraised value as a reference point when deciding whether or not to maintain collision insurance. As soon as a car’s value drops below $4,000, many car owners drop their collision coverage.

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    Image Source

    Wrecked Car. (Supplied by Ildar Sagdejev at Wikimedia Commons; GNU Free Documentation License;

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