Collision insurance coverage isn’t required, so should you always carry collision coverage?
For many drivers, it’s a good idea to carry collision insurance coverage. If you don’t have this coverage, you may have to pay out of your own pocket if you get into an accident and your car is damaged or totaled.
However, there may come a time when your car isn’t worth very much money anymore. When that happens, it may be a good idea to drop collision insurance. The premiums may no longer be worth paying because your car’s value is so low.
This guide will explain how to decide whether to keep collision coverage on your insurance policy or drop it.
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What Does Collision Coverage Pay For?
Collision insurance is optional insurance that pays for damage to your own vehicle when you get into a crash. It can cover:
- Repair of your vehicle
- Replacement of your vehicle if the car is totaled
Collision insurance doesn’t pay for damage you cause to others. And it doesn’t pay if your car is stolen or damaged by something other than a crash, such as a tree falling on it. In fact, there is a long list of things that collision coverage won’t pay for, including:
- Theft
- Vandalism
- Flood
- Fire
- Hail
- Injuries
It only pays when an accident causes your car to need repairs or replacement.
When Collision Coverage Is Non-Negotiable
Buying collision coverage is non-negotiable if you have financed or leased your car. Your lender or lease provider requires that you have this coverage in place. That’s because the car is collateral for the loan. The lender or lease provider wants to ensure there’s enough money to fix it or pay off the loan after a crash.
Collision coverage is also not negotiable if you have an expensive car that you can’t afford to replace. If you have a $60,000 car that gets totaled, you need collision coverage to pay to replace it so you don’t face devastating financial loss.
Benefits of Carrying Collision Coverage
There are some significant benefits of carrying collision coverage:
- You can make sure you’re in compliance with the terms and conditions of your lease or loan.
- Your insurer will cover repairs to your vehicle if you get into a car accident, even if you were at fault for the incident
- Your insurer will provide you with the fair market value of your vehicle to replace it if it is totaled.
- Your expenses are predictable: you pay premiums and know you’re covered for big losses.
How to Calculate Whether Collision Coverage Is Worth It
To determine if collision coverage is worth it, think about how much the insurance would pay out versus how much the premiums are.
Remember, you must pay your deductible before insurance pays the difference. If your car is worth $2,500 and you have a $1,000 deductible, your collision coverage would pay out very little. Paying premiums for the policy likely is not worth it.
But if your car is worth a lot of money, then you’d definitely want to have collision coverage in place. If you damage a $70,000 car, then the insurance company would pay many thousands of dollars to repair or replace it. Even if your collision coverage premiums are $1,000 a year, it’s worth paying for this protection.
Common Factors to Consider Before Dropping Coverage
If you are thinking about dropping collision coverage because your car isn’t worth much, here are a few key factors to consider:
- How much is your car worth?
- How much is your deductible?
- Does your lease or loan require you to carry coverage?
- Do you have savings to pay to fix or replace the car if you get into a crash?
- How much are the premiums?
By carefully considering these issues, you can make an informed choice about whether to drop your coverage.
Alternatives to Dropping Coverage Entirely
If you’re not sure your collision coverage is worth it but you aren’t ready to drop it, here are a few alternatives:
- Shop around for insurance to see if you can lower the cost
- Bundle coverage to see if you can get a discount for having multiple policies
- Review your discounts to see if there are opportunities for savings
Get on the road to recovery with competent legal representation and high-quality medical professionals. Contact our Maryland personal injury lawyer today.
Get Help with Your Claim
Adam Smallow Injury Lawyers can help you after a car accident. Adam fights to secure the settlement your family deserves. When you need a car accident lawyer, our firm will work with you after a crash to maximize the compensation you recover from your own insurer or the insurer of the other driver.
Call or contact us for a free consultation today. You can give us a call at (410) 449-7900 or contact us online to schedule a free consultation and find out how we can help.
Scenario 1: Accident With An Uninsured Motorist
Let’s say that you are in a head-on accident with an uninsured motorist. In this situation, your uninsured motorist coverage should pay for your injuries. Since Maryland requires uninsured motorist property damage coverage, your UM coverage could also pay for damage to your vehicle. However, your collision coverage could also cover damage to the vehicle as well.
Scenario 2: A Hit and Run Accident
In Maryland, if you’re involved in a hit-and-run accident and the other driver is found and identified, you can pursue compensation through that driver’s liability insurance.
If the driver isn’t identified, Maryland typically treats the collision as involving an uninsured motorist. Your uninsured motorist coverage may pay for your injuries, and your uninsured motorist property damage or collision coverage may pay for damage to your vehicle, depending on your policy.
Scenario 3: A Disputed Liability Accident
If liability is disputed in an accident and it’s not clear the other driver was at fault, your collision coverage should pay for repairs or replacement of your vehicle.
Critical Elements of Auto Insurance Coverage:
Insurance Policies should provide coverage for:
- Bodily injury liability: This pays for damages that you cause others to experience, such as if you cause a crash and injure someone.
- Property damage liability: This pays for damage that you cause to others’ property, such as if you damage their vehicle when you cause an accident.
- Uninsured/underinsured motorist coverage: This pays for damage that someone else causes you and should compensate you for if the other at-fault driver had no insurance or too little coverage.
- Collision coverage: This pays for damage to your vehicle in an accident, even if you were at fault. It will replace your car if it is totaled.
- Comprehensive coverage: This pays for non-crash-related issues that cause you to suffer a loss, such as the theft of your car.
You need to make sure you have the right insurance protections in place when you are driving your vehicle in case something goes wrong.
