If you have collision coverage, it can help pay for vehicle repairs if you are involved in an accident or hit a stationary object, such as a mailbox or a fence.
Lenders usually require it, but it’s optional if you don’t have a loan or car lease. So how do you know if you need collision insurance after you’ve paid off your car?
It depends on the current market value of your vehicle, how much you can afford to shell out if your car needs repairs, and how much risk you’re willing to take by driving without it.
What is collision insurance?
Collision insurance helps pay for car repairs after an accident, whether it happens with another car or the sign down the street. This is how it works.
Collision coverage has a deductible that must be paid before the insurance company covers repairs. Deductibles often range from around $ 250 to $ 1,500. When you buy a policy, you choose the amount that’s right for you. Increasing your deductible generally decreases your premium and vice versa.
After paying the deductible, the insurance company will reimburse you for the cost of repairs, up to the current market value of your vehicle. If the cost of repairing your vehicle exceeds the current market value, the insurance company will declare it a total loss and issue you a check for the market value less your deductible. You can use the insurer’s money to help buy a new car.
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How do I know if I need collision insurance if my car is reimbursed?
If you’re still paying off your car loan or rental, your lender will likely require you to have collision insurance because it helps protect their investment if the car is destroyed. But if you own your car, you can choose to transport it.
The market value of your vehicle is one of the most important factors to consider when deciding whether collision coverage is worth it. Don’t know how much your car is worth? Check out the Kelley Blue Book Car Valuation Tool, which shows you the current market value of your car. After selecting the make and model of your car, you can choose trim levels and other options for more accurate pricing.
Once you know how much your car is worth, you can decide whether it makes sense to pay for collision coverage. If your car is only worth $ 1,500 and you have a $ 1,000 deductible, paying the extra premium to keep collision coverage doesn’t make sense. The maximum you can get from the insurance company after a covered incident is $ 500. But if your car is reimbursed and worth $ 10,000, it makes sense to spend a few hundred dollars a year on collision coverage since the insurer would reimburse you for up to $ 9,000 in repairs.
When deciding whether or not to keep collision coverage, you’ll also need to consider how much you can afford to pay for the repairs and the risk you’re willing to assume by driving without it.
How much does collision insurance cost?
According to the Insurance Information Institute, the average cost for collision coverage is around $ 290 per year. But the price can vary widely depending on several factors including your age, the type of vehicle you drive, your driving history, where you live and many more.
To find out exactly how much you’ll need to pay to get collision coverage for your vehicle, you’ll need to get an insurance quote. Policy costs can vary widely from insurer to insurer, so it’s a good idea to get quotes from multiple insurance companies before purchasing coverage. Shopping around can save you hundreds of dollars.
What if i don’t have collision insurance?
If you don’t have collision insurance, what happens will depend on a number of factors. If you are in an accident and another driver is at fault, their insurance company should pay for the damage. But if you caused the accident, or the police can’t determine who is at fault and you don’t have collision coverage, you’ll need to cover the cost of the repair. Your insurance company will not help you pay for the damage.
Ways to save on collision insurance
If you decide it’s worth maintaining collision coverage, there are things you can do that can help keep costs down.
- Increase your deductible. As a general rule, the higher your deductible, the lower your premium.
- Drive carefully. Drivers with clean driving records are often eligible for lower rates than drivers with traffic violations.
- Pay your bills on time. People with a higher credit score are generally eligible for lower insurance rates.
- Group your fonts. Many insurance companies offer discounts to customers who purchase more than one policy.
Remember that collision insurance only covers the cost of repairs to the vehicle. If you’re in an accident and your car can’t drive, you’ll have to pay for towing and a rental car if your policy doesn’t cover these expenses. You may want to consider adding this type of coverage to your policy for additional protection if you don’t already have it.
Whatever coverage options you choose, it’s a good idea to periodically review your policy to make sure you have the protection you need in the event of an accident.