Collision motor insurance will pay to repair or replace your car if you cause an accident. It is different from liability insurance, which pays the other parties damages in an accident you cause. It is also different from comprehensive insurance, which pays if your car is stolen or damaged in a situation other than a car accident. While collision auto insurance offers you more complete financial protection in the event of an accident, not everyone needs collision auto insurance, so that is why always make a habit of comparing your insurance quotes before making a final call.
Do You Need Collision Motor Insurance?
Collision insurance is not mandated by law, as liability insurance is. It is optional for most people, so you get to make a determination yourself if you want to pay the cost of transferring the risk of damage to your car. If you opt to pay for collision insurance, you are simply paying the insurance company to take on the financial risk that something will happen to your vehicle in an accident you cause. If you opt out of buying collision insurance, you are making the determination that it is not worth paying to transfer the risk of damage to your vehicle.
Collision auto insurance is appropriate if it would be expensive or difficult for you to bear the burden of replacing your vehicle if you caused an accident. For example, if you have $50,000 car, avoiding collision insurance to save a few hundred dollars a year in premiums would be foolish. If collision insurance costs you an extra $250 a year in premiums, for example, you are paying only $250 to transfer $50,000 of risk. That is less than one percent of the cost of the risk (.5 percent). This means if your risk of getting into a car accident is greater than .5 percent, buying collision insurance is a wise investment, check here in order to get cheap insurance quotes.
If, on the other hand, you have a $1000 car and a $500 deductible, you would be paying $250 to transfer a $500 risk. This means you would need to have a 50 percent chance of getting into a car accident to make it worthwhile to buy collision insurance. Usually, this means that it is not a wise idea to make such a purchase.
Who Should Buy Collision Auto Insurance?
In some cases, you may be required to buy collision insurance. For example, if you lease a vehicle or have borrowed the money to obtain it, the terms of your loan or lease may require you to carry collision auto insurance to protect the lender. The best advice is to get your auto insurance quote from a trusted and well known insurer in order to keep accountability to the maximum. If this is not the case, determine the replacement value of your car. Subtract the deductible, and then divide this amount by the amount you pay annually for collision insurance. This resulting number represents the percentage you pay to transfer the risk. Use this percentage to determine if it is worthwhile to buy collision auto insurance in your situation.
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